Israeli small cap food manufacturer and distributor, G. Willi-Food (NASDAQ: WILC), announced this week that it had signed a binding letter of intent to form a new joint company with the owners of Shamir Salads, an Israeli manufacturer/distributor of prepackaged, chilled kosher Mediterranean dips and spreads in Israel and abroad.

Mr. Zwi Williger, President and COO of Willi Food commented, "The growth and popularity of Mediterranean style foods has grown beyond ethnic food borders and into the diet of mainstream consumers. Shamir Salad's line of kosher Mediterranean hummus, dips and spreads, appetizers, and gourmet specialties are in line with Willi-Food's core kosher and healthy living businesses."

I love my hummus with a large helping of chips while I enjoy watching the NFL on Sundays. I also love small cap companies with juicy growth stories and G. Willi is just one of those companies. Israeli Billionaire Arkadi Gaydamak, who controls a huge egg business in Russia, recently signed a deal with G. Willi to begin importing high-end dairy products (read fancy, stinky cheeses) to the nouveau riche in Russia.

As Kraft Foods (NYSE: KFT) and its competitors look for new overseas markets where business is good and getting better, G. Willi may ultimately be a good M&A candidate for a large multinational food company.

Zack Miller is the lead equity analyst for America Israel Investment Associates, LLC., the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

The author's fund owns WILC as of 11/04/07.

Food stocks have long been considered a "defensive" area, and when considering this sector investors generally turn to such well known players as Kraft or Heinz. For those who keep kosher, however, the source of products is more limited.

Indeed, I'm always intrigued when I come across a company that is a leader in a market with limited competition and limited coverage by Wall Street. In that light, the latest recommendation from Vivian Lewis -- Israel's G. Willi-Food International Ltd (NASDAQ:WILC) -- caught my attention.

The editor of Global Investing thinks now is the time for investors to stock on shares of this supplier of kosher food products. She notes that Willi-Food is a one-stop supplier: it imports, markets, and distributes more than 400 food products manufactured by some 100 suppliers throughout the world to more than 1,000 customers.

Lewis notes, "Willi-Food excels in identifying changing tastes in its markets. The company is also developing new products with higher margins."

MOST NOTEWORTHY: Digital River Inc (DRIV) was today's only notable initiation.

• American Technology initiated Digital River Inc (NASDAQ: DRIV) with a Buy rating and $65 target. The firm believes Q1 guidance could be weak, but feels weakness would be short-lived as investors gain a better understanding of Digital River's Microsoft Corp- (NASDAQ: MSFT) driven revenue and margin upside in the second-half of 2007...

OTHER INITIATIONS:

• Merriman initiated Idera Pharmaceuticals Inc (AMEX: IDP) with a Buy rating and put fair value at $10-$12 a share.

• Merrill Lynch reinstated Nvidia Corp (NASDAQL NVDA) and KLA-Tencor Corp (NASDAQ: KLAC) with Buy ratings.

• Jefferies initiated CommScope Inc (NYSE: CTV) with a Buy rating and $37.50 target; they believe CommScope is a solid play with trends such as increasing competition among cable operators and wireline service providers as well as increasing bandwidth consumption by enterprises.

• Raymond James started Keystone Automotive Inds Inc (NASDAQ: KEYS) with a Market Perform rating.

• Roth Capital initiated G. Willis Food Int'l Ltd (NASDAQ: WILC) with a Buy rating and 48 target; Roth expects the largest marketer and distributor in Israel of kosher food products to grow at a 15%-20% rate over the next several years.

• JP Morgan initiated Covanta Holding Corp (NYSE: CVA) with a Neutral rating on valuation.

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