SEC - Senvest Capital

[jawn619]

Has anyone asked how Senvest obtains 20% returns? I think this probably an important question we haven't asked and you don't return return 20% a year without some sort of leverage or interesting strategy. You might be buying LTCM at a discount to book but i think it's important to understand the core of the business before looking at the price and fees.

[frommi]

Update:

 

Following information was confirmed with IR on March 23, 2015.

 

RIMA is 100% owned by Richard Mashaal. Actually, when I went back to the annual reports in 1990's, I discovered that it mentioned the entity (which is RIMA) was wholly owned by the executive. Also, the current agreement (12% to SFM, 48% to Senvest Capital, and 40% to Richard) can be modified in any given year. At one point in the past, it was 80% to SFM.

 

Please note that 40% of RIMA MGT Fee paid to Richard Mashaal was reported as part of Non-controlling interest on the income statement. NCI reflect the current year fees and the change in the valuation of the reinvested fees. Therefore actual total operating costs would be the reported op cost + 40% of Fee.

 

It seems that the bonuses for non-executive employees are also significant in good years.

 

I revised some texts on my initial posting with strikethrough and two tables. TER using year end BV increased accordingly by 0.5 to 2 percentage points (depends on performance).

 

Thanks Hielko for your input!

 

Damn. Thanks for the clarification.

[muscleman]

Has anyone asked how Senvest obtains 20% returns? I think this probably an important question we haven't asked and you don't return return 20% a year without some sort of leverage or interesting strategy. You might be buying LTCM at a discount to book but i think it's important to understand the core of the business before looking at the price and fees.

 

That's a good question. I see that their short positions are pretty small in 2013. Like 10% that of long, so maybe not. But that could blow up as well.

[muscleman]

Thank you all for the interesting discussion here. I bought a good sized position today.  :)

I was looking at bank of Cyprus yesterday and found it very interesting. Then I saw that Senvest created a single stock fund just for Bank of Cyprus. Then I found there is a Senvest thread in this forum.

:)

 

I still would like to invite you to look at the bank of cyprus thread that I created. IB does not allow Athen stock exchange trading so I can't buy it, but I am pretty bullish about it just like Senvest.

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bocr-at-bank-of-cyprus/

[Hielko]

Thanks Hielko for your input!

You're welcome :)

Has anyone asked how Senvest obtains 20% returns? I think this probably an important question we haven't asked and you don't return return 20% a year without some sort of leverage or interesting strategy. You might be buying LTCM at a discount to book but i think it's important to understand the core of the business before looking at the price and fees.

Yes, it's a very good question. As far as I understand it the core of their strategy is simply long/short value investing with some leverage added to the mix. I like their strategy, but at the same time I don't think it's a strategy that should deliver a huge amount of alpha.

[muscleman]

US investors, any chance that senvest would be classified as a PFIC? The definition of PFIC is pretty vague to me.

http://en.wikipedia.org/wiki/Passive_foreign_investment_company

 

 

The income test is met if 75% or more of the foreign corporation's gross income is passive income, defined as foreign personal holding company income with modifications.

 

The asset test is met if 50% or more of the foreign corporation's average assets (as defined in the IR Code) produce, or could produce passive income, or are assets (such as cash and bare land) that produce no income. The test is applied based on the foreign corporation's adjusted basis, for U.S. tax purposes, of the assets, or at the election of the particular shareholder, fair market values of the assets.

 

Look-thru of 25% subsidiaries: Interests in 25% or more owned foreign corporations are treated similarly to partnership interests (i.e., looked through) for the income test and the asset test.

[oddballstocks]

US investors, any chance that senvest would be classified as a PFIC? The definition of PFIC is pretty vague to me.

http://en.wikipedia.org/wiki/Passive_foreign_investment_company

 

 

The income test is met if 75% or more of the foreign corporation's gross income is passive income, defined as foreign personal holding company income with modifications.

 

The asset test is met if 50% or more of the foreign corporation's average assets (as defined in the IR Code) produce, or could produce passive income, or are assets (such as cash and bare land) that produce no income. The test is applied based on the foreign corporation's adjusted basis, for U.S. tax purposes, of the assets, or at the election of the particular shareholder, fair market values of the assets.

 

Look-thru of 25% subsidiaries: Interests in 25% or more owned foreign corporations are treated similarly to partnership interests (i.e., looked through) for the income test and the asset test.

 

Fairly certain it is.  That's why it's in my IRA.

[muscleman]

US investors, any chance that senvest would be classified as a PFIC? The definition of PFIC is pretty vague to me.

http://en.wikipedia.org/wiki/Passive_foreign_investment_company

 

 

The income test is met if 75% or more of the foreign corporation's gross income is passive income, defined as foreign personal holding company income with modifications.

 

The asset test is met if 50% or more of the foreign corporation's average assets (as defined in the IR Code) produce, or could produce passive income, or are assets (such as cash and bare land) that produce no income. The test is applied based on the foreign corporation's adjusted basis, for U.S. tax purposes, of the assets, or at the election of the particular shareholder, fair market values of the assets.

 

Look-thru of 25% subsidiaries: Interests in 25% or more owned foreign corporations are treated similarly to partnership interests (i.e., looked through) for the income test and the asset test.

 

Fairly certain it is.  That's why it's in my IRA.

 

hmm... That kind of sucks......

I am fairly confused to the PFIC rules. Do you think most foreign savings and loans banks would be classified as PFIC? Most of their assets are bonds and loans that produce "passive" income.  ::)

[muscleman]

Update:

 

Following information was confirmed with IR on March 23, 2015.

 

RIMA is 100% owned by Richard Mashaal. Actually, when I went back to the annual reports in 1990's, I discovered that it mentioned the entity (which is RIMA) was wholly owned by the executive. Also, the current agreement (12% to SFM, 48% to Senvest Capital, and 40% to Richard) can be modified in any given year. At one point in the past, it was 80% to SFM.

 

Please note that 40% of RIMA MGT Fee paid to Richard Mashaal was reported as part of Non-controlling interest on the income statement. NCI reflect the current year fees and the change in the valuation of the reinvested fees. Therefore actual total operating costs would be the reported op cost + 40% of Fee.

 

It seems that the bonuses for non-executive employees are also significant in good years.

 

I revised some texts on my initial posting with strikethrough and two tables. TER using year end BV increased accordingly by 0.5 to 2 percentage points (depends on performance).

 

Thanks Hielko for your input!

 

Hi,

    Can you please tell me how to reach out to their IR? I'd like to ask them about the PFIC question and whether they send out forms to US investors each year to help them file for QFE election.

 

 

 

Thanks!

MM

[Two Coins and Widow]

 

Hi,

    Can you please tell me how to reach out to their IR? I'd like to ask them about the PFIC question and whether they send out forms to US investors each year to help them file for QFE election.

 

Thanks!

MM

 

Hello,

 

"For more information on Senvest Capital or any of its subsidiaries please contact George Malikotsis at (514) 281-8082 or write to georgem@senvest.com and your inquiry will be looked into promptly."

 

https://www.senvest.com/pages/3311

 

Cheers

[muscleman]

 

Hi,

    Can you please tell me how to reach out to their IR? I'd like to ask them about the PFIC question and whether they send out forms to US investors each year to help them file for QFE election.

 

Thanks!

MM

 

Hello,

 

"For more information on Senvest Capital or any of its subsidiaries please contact George Malikotsis at (514) 281-8082 or write to georgem@senvest.com and your inquiry will be looked into promptly."

 

https://www.senvest.com/pages/3311

 

Cheers

 

Thanks! I sent him an email and got his response: "We do not perform a PFIC analysis and have not sent out forms for QEF elections".

This is a bummer for US investors.  ::)

[frommi]

Annual report for 2014 is on Sedar. Bookvalue at year end 2014 was 264 CAD and based on my calculation is now around 305 CAD, so it trades at 55% of book but should trade at least 10-15% higher.

[oddballstocks]

US investors, any chance that senvest would be classified as a PFIC? The definition of PFIC is pretty vague to me.

http://en.wikipedia.org/wiki/Passive_foreign_investment_company

 

 

The income test is met if 75% or more of the foreign corporation's gross income is passive income, defined as foreign personal holding company income with modifications.

 

The asset test is met if 50% or more of the foreign corporation's average assets (as defined in the IR Code) produce, or could produce passive income, or are assets (such as cash and bare land) that produce no income. The test is applied based on the foreign corporation's adjusted basis, for U.S. tax purposes, of the assets, or at the election of the particular shareholder, fair market values of the assets.

 

Look-thru of 25% subsidiaries: Interests in 25% or more owned foreign corporations are treated similarly to partnership interests (i.e., looked through) for the income test and the asset test.

 

Fairly certain it is.  That's why it's in my IRA.

 

hmm... That kind of sucks......

I am fairly confused to the PFIC rules. Do you think most foreign savings and loans banks would be classified as PFIC? Most of their assets are bonds and loans that produce "passive" income.  ::)

 

No I believe the law accounts for this.  The exception is when the securities or loans or cash are necessary to the functioning of the business.  Banks don't qualify.  Same with brokers or financial services companies.

[frommi]

I attached the letter if someone is interested.

senvest_letter_2014.pdf

[randomep]

 

Senvest dropped 6% yesterday (but recovered most of it today) because they accounced their hedge fund lost 10% as of Aug 25 on their website. That is very weird, whereas they post results for all month end as of last day of every month, this time is 3 weekdays before month end.....

 

anyone know why? I no one helps me I'll probably give them a call.

 

 

[misterkrusty]

i don't know the official answer and would appreciate you asking the company.  but my guess is that their policy is to report ahead of schedule if it looks like the month will be particularly bad

[Hielko]

I imagine that they got tons of calls from investors asking how they were doing in the recent market turmoil and thus decided to give an interim update.

[writser]

I wouldn't worry too much about it. Stock was hardly traded the past few days (and is illiquid anyway), a 6% swing is not that impressive given the volatility this week. The 10% fund decline is more or less in line with what you would expect given their latest 13F . Also remember this number is in USD, book value decline should be more like 5.5%.

 

p.s.: somebody sent me a message asking for an update of my spreadsheet - should be up to date now. It's a bit sloppy because I didn't bother modelling their options, fx positions and I don't know whether they traded anything in the meantime. I arrive at an 11.6% portfolio decline since June, roughly in line with the 12% decline given on their website.

[no_free_lunch]

SEC made a killing during the recovery from the 09 crash so I view this as a potential opportunity.  No position yet but will be watching closely especially if there is a larger crash.

[randomep]

I wouldn't worry too much about it. Stock was hardly traded the past few days (and is illiquid anyway), a 6% swing is not that impressive given the volatility this week. The 10% fund decline is more or less in line with what you would expect given their latest 13F . Also remember this number is in USD, book value decline should be more like 5.5%.

 

p.s.: somebody sent me a message asking for an update of my spreadsheet - should be up to date now. It's a bit sloppy because I didn't bother modelling their options, fx positions and I don't know whether they traded anything in the meantime. I arrive at an 11.6% portfolio decline since June, roughly in line with the 12% decline given on their website.

 

That makes sense, btw where is your spreadsheet?

[randomep]

 

 

Karelia

 

 

Senvest Capital reported FY15 EPS CDN$(35.39), which is pretty much expected.That would give per share book value of CDN$227 at year end. And also with estimated hedge fund losses from the company's 13F and its website, we can expect expect book value after Q1 to be about $205. Today it trades at $124. So the stock trades at its traditional 40% discount.

 

any thoughts?

 

 

 

 

 

[misterkrusty]

think $205 sounds a little too low.  I haven't updated my model yet, though.  Mashaal has historically bounced back nicely from each 20%+ drawdown.  Let's hope history repeats.

[writser]

The EPS exclude foreign exchange gains in comprehensive income. Measured in CAD they actually made a profit last year. BVPS in CAD at year end was 275. For 2016 I estimate their portfolio is down 10% in USD terms and 16% in CAD terms, arriving at $232 live. Looks like it is quite cheap at the moment. I don't follow this name closely anymore so I could very well be wrong.

[randomep]

 

 

My bad, now you guys make me feel much better about it! They pretty much broke even in Q4 15 so the Q3 15 BVPS of $263 is the year end BVPS.  And so ya BVPS now should be about $235.

 

Writser, you mean they make a profit in Q4 right? not FY15.  BTW, thanks for your spreadsheet, I am using it now for Senvest

[misterkrusty]

$232 sounds more accurate to me, but I'll post my estimate once I update for the latest filing.

 

54% of tangible book is dirt cheap IMO for a company that has averaged a ~20% ROE since the mid-1990s.  even considering the crappy liquidity

 

In my experience, great investors don't get stupid.  size can hurt their performance, but I would argue there is little evidence that increased size has had much impact here yet.