Next Vision shares soared by 1,100%, but foreign investors are selling

There are moments when the market reminds us of an iron rule: it is not only important how good the report is, it is important how good it is compared to what has already been priced in. Next Vision, one of the hottest stocks on the Tel Aviv Stock Exchange, submitted an exceptional report this week, and yet absorbed the largest net sales from foreign investors, 97.9 million shekels, almost three times the next stock in the ranking.

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 a position than increase it, net sales are created, an indicator of the direction in which foreign money is leaning.

The manufacturer of stabilized imaging systems for drones and UAVs recorded revenue of about 88 million dollars in the second quarter, a jump of 138% compared to the corresponding quarter. Net profit more than doubled to about 53.6 million dollars, and the operating profit margin stood at almost 59%, an absolutely exceptional figure for a hardware company. The company even raised its revenue forecast for the second time this year, to about 355 million dollars. In the last three years, the stock has soared by about 1,100%. So how does such a stock fall?

Exactly because of the success. When a stock soars by a thousand percent or more and trades at a high valuation, every report, as impressive as it may be, is measured against huge expectations that are already embedded in the price. If the results are "only" excellent and not dreamy, some investors use the opportunity to realize profits. The pressure intensifies when even the company's founders recently sold about 2.2% of the shares to institutional investors.

Chen Golan, chairman and co-founder of Next Vision, addressed this volatility honestly in an interview with ice. Regarding the founders' realizations, he said: "I sold even when the stock was at 140 shekels, and I didn't think then that it had reached its peak," a reminder that even those who know the company from the inside do not know how to time the market. He added that most of the realizations did not stem from an initiative in the open market at all, but from requests by institutional and foreign entities that asked to enter into a holding.

Golan also clarified that he is not in a hurry. Not for the large acquisition that the market has been waiting for for more than a year ("our first acquisition must be right"), and not for an IPO on NASDAQ ("if I thought it was right now, I would do it"). From the perspective of some foreign investors, who are waiting for the next growth engines, the lack of an immediate catalyst is perhaps a sufficient reason to lock in part of the profit.

Further down the ranking, another trend stands out: exiting local financial and energy stocks. Phoenix absorbed net sales of 31.2 million shekels, and Leumi 24.2 million, a continuation of the selling pressure that foreigners have been exerting on the financials over the last few weeks, against the backdrop of interest rate cuts that weigh on banks and insurance companies.

Nofer Energy absorbed net sales of about 26.3 million shekels and Melisron, the income-producing real estate company, with about 23.4 million.

Next Vision is included in the leading indices and has a significant weight in the defense index, so it sits in the pension funds, provident funds, and advanced study funds of most of the public. The lesson here is especially important: a stock can be an excellent company and yet a volatile investment, when the price already embodies perfection.