While most investors think of the United States as the end-all, be-all of technology innovation, many other nations are quickly moving towards the top spot. In 2008, Chinese telecom equipment manufacturer Huawei led the world in patent applications. That same year, many well-known firms located in the United States didn't even crack the top 10. Countries like Taiwan are moving past its "low-cost" production moniker, and into one of high-tech modernism. Funds like the Guggenheim China Technology (Nasdaq:CQQQ) have launched in order to take advantage of these new "emerging tech stories." However, one new minted developed nation could be the rising start of them all.

TUTORIAL: Economics Basics

The New Silicon Valley
With a land mass about the size of Florida and a population under 8 million residents, Israel is rapidly becoming a technology hub. Due to the nations lack of oil reserves (although a major natural gas find off its shores may change that), Israel has been forced to fund its $200 billion GDP via alternative means. Focusing on education and innovation, Israel launched its great tech miracle. About one in eight Israelis holds some sort of advanced degree, and the nation is host to more engineers per capita than the rest of the world. This has pushed the nation into the forefront of several high technology industries, including pharmaceuticals, information technology and software. Israel has the highest rate of start-up companies in the world and leads in patent registrations per capita. Exports of the tech sector have grown by nearly 8.5% annually, and currently sit at nearly $20 billion.

This growth in technology and education is helping Israel become a magnet for foreign direct investment. Israel has attracted the most venture capital investment per capita in the world. Foreign investment reached nearly $9.3 billion in 2009, or 4.8% of GDP. Even Warren Buffett and Berkshire Hathaway (NYSE:BRK-B) have invested in Israel through their 80% stake in Israeli cutting tool manufacturer, Iscar.

Finally, Israel's strength in technology has helped the country run an account surplus and cut expenditures during the economic downtown. The Israeli shekel has outperformed the dollar during the global crisis and nation's banking sector offers none of the sub-prime risks that western banks experienced. Israel has also received strong investment grade credit ratings from Fitch, S&P and Moody's. The biggest praise for the nation came recently when MSCI Barra (NYSE:MXB) reclassified the nation from "emerging" to "developed", putting Israel in the same boat with the United States, France and Canada.

Investing in the Tech Super Star
With the Tel Aviv 25 index soaring more than 62% over the last five years, compared with the flat performance of the S&P 500 and the nation's tech leadership, investors should consider Israel for a portfolio. Both the iShares MSCI Israel Index (NYSE:EIS) and Aberdeen Israel Fund (NYSE:ISL) make adding the nation easy. However, with more 100 Israeli companies trading on U.S. exchanges, adding individual rising stars is easy.

Getting a vote of confidence from Oracle (Nasdaq:ORCL), which owns 10% of its shares, Mellanox Technologies (Nasdaq:MLNX) is a great way to play the growth of cloud computing. The company supplies connectivity solutions and services for servers and storage and will be a major beneficiary of Oracles moves into the cloud.

Providing some of those cloud applications is ClickSoftware Technologies (Nasdaq:CKSW). The company provides on-demand workforce and service management software products including service scheduling, mobility and location based software applications. The company has already racked up some big-name clients like Caterpillar (NYSE:CAT).

There's much debate over which wireless architecture will work best. WIMAX is one possible solution, and Alvarion (Nasdaq:ALVR) is one of the global leaders in the technology. The company does make an interesting long-term pick as communication needs grow in the emerging world.

The Bottom Line
Israel represents a unique investment opportunity. The combination of strong financials and a high-tech economy makes it distinctive choice for investors wanting to get more from their technology investments. While it is not without risks, the nation should continue to prosper for years to come. (A diversified portfolio will protect you in a tough market. Get some solid tips, in 5 Tips For Diversifying Your Portfolio.)

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