Teva Pharmaceutical Industries Ltd. engages in the development, production, and sale of medicines. It operates through the following geographical segments: United States, Europe, and International Markets. The United States segment focuses on therapeutic area of central nervous system (CNS) portfolio, and is involved in the distribution business of generic, biosimilar and medicines, and over-the-counter (OTC) pharmaceutical products from the firm and third-party manufacturers to independent retail pharmacies, pharmacy retail chains, hospitals, and physician offices in the United States. The Europe segment offers OTC portfolio including SUDOCREM, NasenDuo, DICLOX FORTE, OLFEN Max, and FLEGAMINA brands in European Union, the United Kingdom, and certain other European countries. The International Markets segment provides its products to countries such as Canada, Israel, Russia, Latin America, and Japan. The company was founded in 1901 and is headquartered in Tel Aviv, Israel.
COMMENTARY
Market Review
Israeli equities traded in a split pattern during August, with the TA-125 Index edging down 0.4%. Investors continued to favour larger, more liquid names over more sensitive mid- and small-cap stocks. The banking and insurance sectors led the market. Banks rose approximately 5%, supported by strong second-quarter results and double-digit returns on equity, and insurance stocks were up roughly 12%. By contrast, technology stocks fell approximately 7%. Local semiconductor names came under pressure amid shifting rate expectations and reduced investor appetite for smaller, less liquid holdings.
Globally, US domestic demand remained strong and AI-related optimism continued to support technology sentiment. In contrast, US Treasury yields rose on hawkish Federal Reserve commentary, and energy and commodity inflation re-emerged as global themes. Brent oil approached USD 90 per barrel, and European gas prices reached their highest levels since early 2023.
On the Israeli macro backdrop, second-quarter GDP grew 15.4% annualised, well ahead of consensus expectations of around 10%. The rebound was driven by a sharp recovery in private consumption and exports following the war-affected first quarter. That said, the domestic picture was less robust than the headline implied. Once production by Israeli-owned companies abroad is stripped out, first-half growth was closer to 1%. Inflation remained contained, with the July print at 1.5% year on year. Upside risks are building from higher global energy and commodity prices, partly offset by continued shekel strength. In early September, the central bank cut its policy rate by 25 basis points to 3.25%. The move was framed as a risk-management step, with the bank’s 12-month view implying rates around 3.0% to 3.25%.
Portfolio Commentary
The Fund lagged the broader market in August. Strong contributions from banking exposure were more than offset by a sharp decline in Nayax, alongside broader weakness across renewable energy and semiconductor holdings.
Israeli banks were the standout contributor, up approximately 6% collectively during the month. Bank exposure remains a meaningful part of the portfolio, and the team continues to view the sector as well positioned given current profitability trends.
Nayax, a cashless payment solutions provider, was the largest single detractor, declining approximately 25% during the month. Early in August, the company released results that included a cut to full-year cash flow guidance, driven by investments in EV charger rollout that management expects to moderate next year. In reaction, shares fell as much as 35% from their peak to the monthly low. Later in the month, Nayax announced its largest-ever acquisition, a USD 350 million all-cash purchase of IPS Group, a US-based smart parking technology provider that manages over 250,000 parking spaces. The team views it as highly synergistic with Nayax’s existing platform. Shares recovered some ground following the announcement. The team used the weakness to modestly increase the position. A meaningful part of the holding had been built through traded options, which provided downside protection and allowed the exposure to be converted gradually into ordinary shares.
Enlight and Energix, both renewable energy developers, weighed on performance, declining approximately 10% and 8%, respectively. Semiconductor holdings were also weak, with Nova, a process control and metrology provider, down approximately 10%, and Tower Semiconductor, an analog foundry, down approximately 6%. The declines largely reflected macro-driven positioning rather than any change in the underlying investment cases. Fundamentals remain intact, and the team maintains its long-term conviction.
Telsys, an electronics distribution and embedded computing group, published strong second-quarter results during the month. Sales at subsidiary Varisite grew approximately 60%, accelerating from the prior quarter, alongside approximately 80% profit growth. Distribution activity also improved meaningfully, with sales more than doubling and profit roughly tripling. Management also built component inventory to meet demand in coming quarters. The team continues to view Telsys as well positioned to sustain growth into the second half.
Looking across the portfolio, the team sees underlying fundamentals as intact and remains positioned for continued improvement in the Israeli macro backdrop.