Description

Long: Senvest Capital (SEC CN Equity)

Note: this is an illiquid stock that is likely better for smaller funds or PAs.

Senvest Capital is a publicly-traded value investment manager based in Canada and manages C$3.9bn as of year-end invested in public equities across two funds (a master fund and a global technology fund). Strong Q1 results (Jan: +38.5%, Feb: +15.3%, Mar +4.7%) suggest a NAV/share of ~C$1,031 against last close price of C$313. There is, however, tracking error between the public reporting of the hedge fund and the returns realized by Senvest Capital due to investments outside of the fund and expenses. For instance, the hedge fund reported a +82% Q4 2020 but Senvest Capital reported +42% growth in its book value. We therefore estimate that Senvest Capital’s book value has increased +33% YTD to $767 per share. With shares trading at ~41% of our estimated mark-to-market NAV versus a historical range of 50-70%, shares could return 45% from here simply from returning to 60% of book value, and Senvest has consistently compounded capital at above average rates since 1997.

Senvest in its current form was started in 1997 by Richard Mashaal with C$5mm to invest in public equities, and Mashaal continues to oversee investment operations today. The fund invests both long and short in a concentrated value-oriented public equity strategy that has returned 6,500% cumulatively (Mar 2021 ITD) vs 545% for S&P 500 (11/30/97-3/31/21, dividends reinvested). Returns have been volatile given Senvest’s strategy, but value has steadily compounded over time. More detailed history of the fund is explained in this article: https://thehedgefundjournal.com/contrarian-aligned/

The shares have historically traded in a range of 50-70% of book value. While the stock appears to trade at 73% of book, that does not account for strong fund performance in the current quarter. Based on publicly disclosed performance for Q1 performance using Senvest’s latest 13-F, we estimate book value of ~C$767/share, which puts shares at ~40% of book, well below the historic trading range. A return to 60% of NAV would encompass a 67% increase in the stock price. We believe the historic discount is also intrinsically unjustified given Senvest’s long history of compounding value for investors.

(Note: monthly performance can be found at www.senvest.com >“Enter” Senvest Capital” > Financial Information > Other Financial Information)

Note that the strong Q1 performance is not reflected in the above graph, so screening will not show that the stock is trading well below its historic P/B range.

Senvest also recognizes the discount in its shares and has steadily repurchased shares. In 2020, the company spent $8mm repurchasing stock. Senvest has no options outstanding and none have been issued since 2005, according to the company.

Senvest typically reports 1Q results in early May, which we believe is the nearest catalyst. Longer-term, we believe Senvest can continue to grow NAV and will repurchase shares at discount to intrinsic value.

Note: There historically has been tracking error between NAV and implied NAV from Master Fund performance, due to the other funds Senvest manages. 

Catalyst

Q1 reporting showing larger than average NAV discount