Good write-up. Just a quick comment on the “operating lease puzzle”. Ituran has already paid for the telematics boxes — they’re not a liability. As far as I can tell there’s nothing significant hiding off balance sheet.
- I dislike nepotism. Good stewardship is about doing what's best for the company. Senior management appointments and succession should be based on merit not membership of a family. There are 8 billion people in the world - what are the chances that the sons (plural) of the founder are the best choices to be running this company? Billions, if not trillions to one. If management put themselves and their family before shareholders, do you want to be invested?
- Continuing from the first bullet, the remuneration being extracted from the company by the family is egregious. It supports the point made in the first bullet.
- Finally, withholding taxes are super high in Israel, and as an overseas investor, trying to claim them back is like trying to take gold bullion out of Fort Knox. You have no chance. So you lose about 25% of the dividend. I only invest in Israeli companies that are focused on growth and pay little or no dividends for this reason. I am not investing to benefit the Israeli tax authorities or the lifestyles of the founders - I want my capital to be working for me.
In short, looks like a compelling thesis for a very interesting company. With different management it would be interesting, but I invest in people before companies and I don't like the sound of this group of people.
Like when Sodastream was public, the Israel connection might also be a negative for certain types of investors/consumers + what happened with those Hamas pagers BUT given the levels of car theft that probably exist in place like Brazil, consumers there may not care much IF there are no other good alternatives...
The family situation though is often the case with Asian businesses (Heck, even much of Big Tech consists of "controlled companies" by the founders...) and can be interpreted both good and bad e.g. maybe the family won't loot/asset strip/bankrupt the company ala private equity style (e.g. Red Lobster etc)... ... ....
Regarding the dividend tax, that's definitely helpful to point out. A 25% tax haircut on dividends utterly changes the investment math. Their 5% yield suddenly becomes 3.75% for you. And I should have remembered that from when I held ZIM.
On the compensation, I do agree that it's not a great sign. $6.8 million flowing to the family while the entire board gets one-tenth that amount? That's not stewardship. It's a wealth transfer mechanism.
Regarding the family owned part, yes, you're absolutely right about the math. The odds that multiple Sheratzky family members represent the optimal leadership talent from a pool of billions? Astronomical. But, family businesses are weird creatures, as we have seen before. Sometimes what looks like nepotism on paper translates to alignment, institutional memory, and thinking in decades instead of quarters. Sometimes.
There are interviews available online and transcripts, so I would advise anyone interested in the company to get more familiar with the personalities of the family and their pros and cons.
But yes, I'm not excited either.
Honestly, would you find Ituran compelling if they kept the cash and pursued growth rather than dividends? Or is the family extraction machine fundamentally broken regardless of distribution policy?
Good write-up. Just a quick comment on the “operating lease puzzle”. Ituran has already paid for the telematics boxes — they’re not a liability. As far as I can tell there’s nothing significant hiding off balance sheet.
Excellent write up - as usual. Thank you.
From my perspective, I have a few comments:
- I dislike nepotism. Good stewardship is about doing what's best for the company. Senior management appointments and succession should be based on merit not membership of a family. There are 8 billion people in the world - what are the chances that the sons (plural) of the founder are the best choices to be running this company? Billions, if not trillions to one. If management put themselves and their family before shareholders, do you want to be invested?
- Continuing from the first bullet, the remuneration being extracted from the company by the family is egregious. It supports the point made in the first bullet.
- Finally, withholding taxes are super high in Israel, and as an overseas investor, trying to claim them back is like trying to take gold bullion out of Fort Knox. You have no chance. So you lose about 25% of the dividend. I only invest in Israeli companies that are focused on growth and pay little or no dividends for this reason. I am not investing to benefit the Israeli tax authorities or the lifestyles of the founders - I want my capital to be working for me.
In short, looks like a compelling thesis for a very interesting company. With different management it would be interesting, but I invest in people before companies and I don't like the sound of this group of people.
I linked to the piece in my Monday links collection post: https://emergingmarketskeptic.substack.com/p/emerging-markets-week-may-12-2025
Like when Sodastream was public, the Israel connection might also be a negative for certain types of investors/consumers + what happened with those Hamas pagers BUT given the levels of car theft that probably exist in place like Brazil, consumers there may not care much IF there are no other good alternatives...
The family situation though is often the case with Asian businesses (Heck, even much of Big Tech consists of "controlled companies" by the founders...) and can be interpreted both good and bad e.g. maybe the family won't loot/asset strip/bankrupt the company ala private equity style (e.g. Red Lobster etc)... ... ....
Very good points. And thank you!
Regarding the dividend tax, that's definitely helpful to point out. A 25% tax haircut on dividends utterly changes the investment math. Their 5% yield suddenly becomes 3.75% for you. And I should have remembered that from when I held ZIM.
On the compensation, I do agree that it's not a great sign. $6.8 million flowing to the family while the entire board gets one-tenth that amount? That's not stewardship. It's a wealth transfer mechanism.
Regarding the family owned part, yes, you're absolutely right about the math. The odds that multiple Sheratzky family members represent the optimal leadership talent from a pool of billions? Astronomical. But, family businesses are weird creatures, as we have seen before. Sometimes what looks like nepotism on paper translates to alignment, institutional memory, and thinking in decades instead of quarters. Sometimes.
There are interviews available online and transcripts, so I would advise anyone interested in the company to get more familiar with the personalities of the family and their pros and cons.
But yes, I'm not excited either.
Honestly, would you find Ituran compelling if they kept the cash and pursued growth rather than dividends? Or is the family extraction machine fundamentally broken regardless of distribution policy?