Senvest Partners pulled way ahead of benchmarks in March, earning 4.5% for the month and 11.6% YTD compared to 0.8% and 1.8% for the S&P 500, largely because of investments in stocks that have low current earnings which diverged from the rest of the market. The hedge fund’s long positions gained $29.5 million last month ($85.3 million YTD), while short positions accounted for $4.9 million (still down $2.0 million YTD), according to a letter to investors reviewed by ValueWalk. The hedge fund is off to a strong start for 2014 after a nearly 80% return in the prior year.

Senvest YTD 0414

Senvest’s top gainers

Senvest’s best position in March was the pharmaceutical company Depomed Inc (NASDAQ:DEPO) which gained 20% after earnings beat sell-side consensus and guidance that the company will become profitable by the end of the year with more than $200 million in revenue, while medical devices firm Syneron Medical Ltd. (NASDAQ:ELOS) gained 12%. Insurance company Genworth Financial Inc (NYSE:GNW) gained 14% in March because growth in Australian equities as investors look forward to an IPO for the group’s Australian mortgage insurance business. Senomyx Inc. (NASDAQ:SNMX) saw its stock price rise 7% after announcing that its flavor enhancer Sweetmyx was approved as ‘generally recognized as safe’ (GRAS), paving the way for its inclusion in future Pepsi Co products. YPF SA (NYSE:YPF) gained 16% after reporting an earnings beat, and Howard Hughes Corp (NYSE:HHC) gained 3%.

Senvest’s under-performers

Some of Senvest’s biggest losses last month were due to the 12% drop in Immersion Corporation (NASDAQ:IMMR)’s stock price, but the fund attributes this to sustained selling by another fund that has been reducing its position to meet investor redemptions. Puerto Rican bank Doral Financial Corp. (NYSE:DRL) was down 25% after it reported a loss for 4Q13, but Senvest believes that it is cleaning up its balance sheet and could rebound along with the rest of the Puerto Rican economy. Other large losses include the trucking company YRC Worldwide, Inc. (NASDAQ:YRCW) which fell 14% and tech company AudioCodes Ltd. (NASDAQ:AUDC) which lost 18% last month.

Senvest finding more short opportunities

Senvest has reduced its net long exposure to 117% at the end of March from 126%, partially by selling off most of its Apple Inc. (NASDAQ:AAPL) stock, and sees more and more opportunities to short stocks now that the bull market is fairly mature. While Senvest has solidly outperformed markets since its inception, with growing price dispersion and earnings realities catching up with some optimistic prices, it should be able to find more opportunities to differentiate itself from the market.