The Senvest train is back on the track, as the long / short hedge fund delivered 7% returns in February, coming off 79.4% returns in 2013, its fourth best year since its founding in 1998.  The hedge fund’s best year was 2009 with 229.1% returns; its worst year was 2008, down -54%, one of only four losing years.

Senvest Yellen Tapering

Senvest – Typically long fund trimmed long exposure in February

With nearly $1 billion under firm management, the long / short fund came into February with 119 long positions and only 17 short positions, with the net long exposure trimmed slightly from January at 126% while the net shorts were -26%, based on an investor letter reviewed by ValueWalk.  As a result of increases in equity prices and weakening trends in China, the fund  began trimming its net long exposure in February, the letter said. Most of the losses the fund experienced were due to the fund’s short exposure.

Senvest – Change in attitude regarding Fed tapering

While some fund managers have been watching the US Federal Reserve and its tapering operation with trepidation, privately fearing the worst under former Chairman Ben Bernanke, Senvest notes with interest a turnaround in attitude under Fed Chair Janet Yellen.  Other fund managers have expressed surprise at Yellen’s refreshing approach to market manipulation.  Fund managers have speculated they think the Fed under Yellen considers excessive market manipulation a mistake.

The fund noted that Fed tapering is now viewed positively by investors, which has led markets higher in response to remarks by new Fed Chair Janet Yellen indicating no change in the Fed tapering policy,  pointing to the future withdrawal of quantitative easing, the letter said, while noting the general market environment during February.

Senvest – Fund gainers

The fund’s biggest gainers were mostly in biotech, energy, finance and real estate stocks.  Mixed use real estate company Howard Hughes Corp (NYSE:HHC) (“HHC”), the fund’s largest position, jumped 11% on the month. Argentine oil and gas exploration and development company YPF Sociedad Anonomia (“YPF”) rebounded 21% after January’s peso devaluation shock and ability to mitigate some of the peso devaluation.  Other core holdings with solid gains, which included: women’s branded accessories company Vera Bradley, Inc. (NASDAQ:VRA) (“VRA”), up 10%; less-than-truckload shipper YRC Worldwide, Inc. (NASDAQ:YRCW) (“YRCW”) up 19%; and commercial real estate REIT Northstar Realty Finance Corp. (NYSE:NRF) (“NRF”) up 6%.

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Losses on consumer related shorts

The fund took a hit on medical, services and shorts in consumer related stocks.  Aesthetic medical device company Syneron Medical Ltd. (NASDAQ:ELOS) (“ELOS”), was down -8% despite meeting earnings expectations.  The fund bought on this drawdown.  Helicopter services company ERA Group (“ERA”) lost -4% on no news on the month, but interestingly Barclays initiated coverage on the stock. Five short positions, largely in consumer-related sectors, also weighed on the month’s results.