Yotav Kostika: Why Israeli stocks lost their momentum and where he sees the next opportunities

Yotav Kostika, 42, the newly independent investor who now manages the family office of the four founders of Wiz and still advises Mor on hedge fund trusts, returned to Globes’ “Market Forces” podcast two years after his first appearance. He says the Israeli market is still fascinating, but its recent rally has given way to a healthy correction after a period of wartime euphoria and high expectations.

Kostika argues that Israel’s market had been cheap for years, weighed down by a heavy mix of real estate, financials and traditional industry, and then benefited from security-related milestones, including the pager operation and the killing of Hassan Nasrallah in October 2024. Institutional money, foreign investors and retail buyers then pushed prices higher, sometimes to unrealistic levels, with banks on 6x earnings and insurers at roughly one-third of book value. He says the recent pullback is driven by disappointment that hopes for a “new Middle East” did not materialize. “In a rising market, people look for stories, in a falling market, they go back to multiples,” he says.

He adds that Israeli investors have become more seasoned after October 7, the Iran attacks and the war. Instead of panicking, many now buy the dip and think longer term, while young investors are entering the market through the brokers’ platforms. Still, he warns that the key test will come in the next real crisis. On currency, he says the shekel remains supported by a current account surplus of 3% to 4% a year, but institutional hedging has also played a major role. He dismisses criticism that the institutions alone drive the exchange rate, noting their exposure to foreign exchange fell from about 30% in late 2024 to 16% to 17%.

Looking ahead, Kostika says U.S. markets are now more attractive than Israel’s, where valuations have largely normalized and geopolitics remain uncertain. His preferred sector is broad infrastructure, including energy and power transmission, especially with projects such as the metro likely to absorb huge sums. He also sees opportunities in semiconductors, finance, defense and the firms building AI data centers. By contrast, he calls Israeli housing the clearest case of excessive optimism, saying many urban renewal projects are no longer economical because costs have jumped, prices have fallen and financing is expensive.