To bag winners in a hot Middle East economy, a number of big investors are buying shares of a New York outfit: Ampal-American Israel. No, it isn't a bank, although Israel's largest--Bank Hapoalim--controls it. Ampal is a holding company with large chunks of 26 Israeli companies in real estate and finance, energy, hotels, and technology.

"Ampal reflects the growing strength of Israel's economy, and we think Ampal's stock is significantly undervalued because of hidden values in many of the assets it holds," says a money manager at a New York asset-management company that owns 5% of the equity. He figures the stock will double in 18 months. U.S. investors, he notes, "are starting to pay serious attention to the investment prospects in Israel, with gross domestic product growing at an estimated 6%."

Analyst Sherri Spear of Lehman Brothers agrees. She says the current valuation of Ampal, at 8 a share, is "extremely attractive." It is "trading at an 18% discount to the net asset value," she notes. By comparison, Spear points out that First Israel Fund, a mutual fund also focusing on Israel, trades at an 18% premium.

She says Ampal's concentration in Israel's domestic business offers an opportunity for investing in sectors that will benefit from the widening interest among European and U.S. investors. Some 22% of Ampal's investment is in hotels, including Israel's second-largest, Moriah Hotel, of which it owns 46%. A further 23% is in energy, 45% in real estate and finance, and 10% in technology.

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