Most Top Performing Tel Aviv Stocks of 2021 Fail to Outperform Market Over Time
The year 2021 marked a pivotal moment for a new generation of investors in the Tel Aviv Stock Exchange, fueled by near-zero interest rates, abundant liquidity, rapid economic recovery, and soaring corporate profits. This environment triggered a broad rally in stocks, a surge of new investors, and an unprecedented wave of IPOs, with the TA-125 index rising about 30% that year. Nearly 100 companies went public, but five years later, many of the standout stocks from 2021 have failed to sustain their initial gains or outperform the market.
The top ten TA-125 performers in 2021 delivered exceptional returns ranging from 93% to 161%, led by Delta Galil (+160%), fueled by a rebound in global apparel and online sales growth. Other leaders included Delek Group (+160%) benefiting from energy price recoveries and natural gas developments, and Bonus Biogroup (+154%), which gained investor enthusiasm due to its stem cell-based COVID-19 treatment prospects. However, since the start of 2022, only three of these ten stocks have outperformed the TA-125, which itself rose nearly 99%. Six stocks, including Bonus Biogroup, Israel Corporation, and ICL, have posted negative returns, with Bonus losing nearly 78% of its value.
Bonus Biogroup exemplifies the risks of "dream stocks" that soared on speculative hopes without significant revenues or profits. Its market value shrank from about 1.5 billion shekels at the end of 2021 to roughly 327 million shekels today. Similarly, Electreon, a company developing electric road charging technology, entered the index during the 2021 euphoria despite lacking substantial earnings.
Conversely, companies like Delek Group, Kamtek, and Nova have continued to generate strong returns, supported by solid business models, profitability, and ongoing growth driven partly by macro trends such as the AI-driven chip demand surge. Overall, the 2021 top ten stocks averaged a 67.9% return over 4.5 years, trailing the TA-125 by about 30 percentage points.
Academic research confirms this pattern, identifying "lottery" or "glamour" stocks that attract investors with high volatility and big growth stories but tend to underperform over time. Studies show investors pay a premium for the chance of outsized gains, similar to lottery tickets, often leading to price corrections. Even professional fund managers sometimes hold these stocks due to client expectations rather than conviction in their long-term value.
As the market experiences a similar rally in 2025-2026, questions arise whether investors will repeat past mistakes chasing hot stocks or apply lessons learned from the 2021 experience.
