The chip stock reversal: From foreign investor favorite to sell-off target
For weeks, the Israeli chip giant was at the top of foreign purchases, and this week it jumped to the sellers' side. Along with it, a hot defense stock continues to absorb heavy liquidations. What is behind the wave of liquidations, and what does it teach us about your portfolio?
In the capital market, even the greatest successes come with a moment of realization. The net sales ranking of foreign investors on the Tel Aviv Stock Exchange this week reveals two prominent trends: profit-taking in chip stocks that have soared, and continued pressure on one of the flagship defense stocks.
Reminder: "Net sales" are not an escape from the stock, but the difference between what foreigners sold and what they bought. When more of them reduce positions than increase them, net selling is created, an indicator of the direction in which foreign money is leaning.
At the top of the sales, again, is Next Vision, with net sales of 32.31 million shekels. The manufacturer of stabilized imaging systems for drones and UAVs continued to absorb liquidations from foreigners, even though it recently published an exceptional report: revenues that jumped by 138% and an operating profit margin of almost 59%.
The reason for the sales is precisely the success: after a jump of about 1,100% in three years, the stock is trading at a high valuation, and every report is measured against huge expectations. When even the company's founders recently realized part of their holdings, the pressure intensifies. This is a classic case of an excellent stock that has become a volatile investment.
The new story of the week is the reversal in chips. Tower Semiconductor, which for long weeks led the foreign purchase ranking, jumped this week to the sellers' side with 31.17 million shekels. Alongside it, Nova, the manufacturer of chip control equipment, was sold for 24.12 million shekels.
After a prolonged rally in chip stocks, which benefited from the artificial intelligence wave, it seems that foreigners are locking in some of the profits. This is not necessarily a negative signal about the companies themselves, but a natural move of profit-taking after sharp rises, especially when technology stocks on Wall Street weakened this week.
Phoenix absorbed net sales of 27.88 million shekels, a continuation of the sales pressure that foreigners have been exerting on insurance companies over the last few weeks. Insurance companies are particularly sensitive to the capital market, as a significant part of their profits comes from the returns on the investments they manage, and therefore they often behave like an option on the market.
The International Bank completes the top five with 27.1 million shekels, and here too there is a reversal: a few weeks ago, the International Bank was at the top of foreign purchases, another sign of how quickly sentiment changes in the financial sector.
According to the movements of foreign investors, a picture emerges that foreigners are exiting the chips that have soared and the expensive defense stocks, and entering renewable energy and banks. This is not a vote of no confidence in the Israeli economy, but dynamic risk management, where big money locks in profits in one place and looks for an opportunity in another.
The important lesson for the Israeli saver: stocks like Next Vision, Tower, and Nova sit in the pension, provident, and advanced training funds of most of us, and these liquidation movements affect their value. And when a stock has jumped hundreds of percent, even an excellent report is not always enough to justify the price.
