Investing guru Warren Buffett shocked the investing world exactly two years ago when he plunked down a cool $4 billion on an Israeli company, Iscar, that specializes in metal cutting tools. It was his largest international purchase by far, and investors were left wondering what he was thinking.

Well, flash forward to May '08 and once again Buffett appears to be a genius. As reported by Marketwatch: "Buffett said that he had very high expectations when Berkshire struck the deal, and that the metal-cutting-tool maker has "exceeded that in every way."

"It's been a dream acquisition," he said.

Since that acquisition, Israel has become a hot destination for foreigners to invest. The local stock market has been one of the best performers in the world and the Israeli currency, the Shekel, has surged to record highs and has been the second strongest currency in the world in '08.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 5/1/08

I have been feeling guilty about not posting in a while but I have been traveling and just came upon something worthy and a terminal that is convenient at the same time. Warren Buffett of Berkshire Hathaway (NYSE:BRK.A) has made big news recently having purchasing an Israeli metal working company named Iscar, his first outside the United States. My day has been spent with Jonathan Medved of Israel Seed Capital, that most notably just sold Shopping.com (another Israeli Company) to eBay, Inc. (NASDAQ:EBAY)...so what now?

It turns out that a company called GNRY Green Energy has started generating substantial amounts of power utilizing steam generators for industrial use primarily associated with food processing plants. GNRY has taken equipment readily available in the United States and waste product from trees in Israel, and instead of disposing of them in landfills is using them as fuel. By utilizing existing technology, looking backwards -- wood is an ancient fuel -- and extending its usefulness in a way not previously used in these types of factories, they are moving forward by salvaging waste to reduce energy consumption at the plants and conserve precious land.

When Warren Buffett invested $4 billion in Berkshire Hathaway's first investment overseas, he didn't know a war was about to break out near his investment.

Iscar Metalworking is a privately held company in which Buffett acquired 80%. It is situated in Tefen, a beautiful industrial park in the Galilee just a few miles south of the Lebanese border. The industrial park, built by the Wertheimer family, is unique in its aesthetics and employs people from all over northern Israel. I visited the park itself on several occasions just to tour the beautiful surroundings, the sculpture garden, and the open museum.

However,when the Israeli-Lebanese war broke out, Iscar had to close shop for a few days until the cease-fire was declared. Buffett, who bought the 80% stake in the plant sight unseen and sealed the deal only a week before the war broke out, finally went to see his new purchase yesterday. While Buffett acknowledges he had concerns during the war he doesn't regret the investment, saying that "most of the time Israel is no more dangerous than the U.S."

Iscar's financials are closely guarded but sources estimate the company's net income last year was $440 million on revenues of $1.4 billion. Stef Wertheimer, a self educated, self-made man, started Iscar as a backyard metalworking business. Growing and expanding over the years the company now has 60 subsidiaries worldwide making precision carbide tools for the automotive and aerospace industries, among others.

After mostly dealing with the son, Warren Buffett has also finally got to meet the father, Stef Wertheimer. I could be wrong about this, but I would assume that the family values and the personalities were a match that helped facilitate this deal. Especially in light of the Wertheimer family's commitment to promoting Middle East peace through industrial parks modeled after Tefen.

Buffett's investment in Israel isn't unique as many American and international companies invest in Israel. However, Israel is more well known for its tech sector and for its innovative start-ups that get picked up by larger companies often, with Lucent acquiring start-up Mobilitec just last week. R&D and manufacturing facilities opened by Microsoft and Intel are other examples of investments in Israel's tech sector.