Israel's Best-Rated Stocks Show Growth Plenty Of Problems

A scan of Israel's top-rated companies reveals some recurring themes: Technology is the country's forte, but many of their best companies are either too small or trade too thinly.Maybe that's appropriate. Israel is a very small country (about the size of New Jersey) with a population of 7.6 million (not quite that of New York City). And its relentlessly hostile neighbors force the Jewish state to maintain a top-notch military. That, and an educated, highly skilled population make technology a natural pursuit.Israel's GDP grew 4.7% last year, according to the International Monetary Fund. But the IMF says Israel isn't immune to the global slump: Look for just 2.8% GDP growth in 2012, the IMF says. View Enlarged ImageTaro Pharmaceuticals (TARO) offers an extreme example of the problems with many Israeli issues: Solid earnings and sales growth and a soaring stock probably aren't enough to get you to buy a stock with a paltry average daily volume of 48,000.Chip designer Mellanox Technologies (MLNX) is faring well on average daily volume of 216,000 shares. After edging up from a base-on-base-on-base structure, Mellanox finally is getting a real lift as it rebounds from its 10-week line.With a market cap of $1.7 billion, Mellanox has logged two straight quarters of solid EPS growth. That followed four quarters of declining earnings. Sales growth has ramped up in recent periods.Allot Communications' (ALLT) biggest problem these days may be it's nowhere near a buy point. The company provides network-optimization technologies to manage traffic and Internet access.Allot stands 24% above its 18.91 cup-with-handle buy point.Small-cap Allot trades a healthy 478,000 shares per day. The company has logged five straight quarters of triple-digit earnings growth. Margins are rising.But EPS estimates for Q1 are predicting a 38% rise — still fine but a big slowdown from its recent torrid gains.Something Isn't KosherClickSoftware Technologies (CKSW) offers an example of the risks you run with a thinly traded stock.ClickSoftware, which trades 175,000 shares on an average day, crashed 16% Monday. The $334 million company had offered Q1 revenue guidance of $21.6 million, well shy of the consensus estimate of $23.35 million.Did ClickSoftware's thinness make a bad situation worse? One has to suspect the answer is yes.Shares of Magal Security Systems (MAGS) have doubled in the past few months — and the average daily volume has soared to 194,000 from 32,000.Magal develops and installs perimeter security applications — a natural outgrowth from a country with serious border issues.Israel accounts for just 20% of Magal's revenue. Its other main business is found in North America (31%), South America (20%) and Europe (20%).Despite its rapid growth, Magal has a market cap of just $80 million, and still trades well below 10 per share.While the company turned a profit last year, it had suffered big losses the prior three years. Estimates for 2012 aren't available.