Richard Mashaal‘s RIMA Senvest Management is one-of-a-kind hedge fund that is not afraid to go against the consensus opinion and employ contrarian investment strategies on companies that have lost favor among other investors. In a recent 13G filing, the fund increased its stake in one such company, Marrone Bio Innovations Inc (NASDAQ:MBII), to 1.30 million shares from a previous holding of 1.16 million. The new stake represents 5.34% of the company’s outstanding common stock. We’ll look at that move and briefly run down the fund’s top three micro-cap picks as of March 31 as well.
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RIMA Senvest hunts for bargains on the stock market that have the potential to double or triple in value over the next one to three years. Founded in 1996, the fund’s annualized returns stood at 20.6% by the end of 2013. The fund’s performance in 2003 and 2009 was truly exceptional, when it generated returns of 169% and 229% in those years, respectively. However, the strategy backfired in 2008 as the fund incurred losses of 54%. The market value of the mid-sized fund’s public equity portfolio stood at $1.61 billion at the end of the first quarter. Most of Senvest’s holdings are in small companies and in the micro-cap category the top spots are occupied by Gain Capital Holdings Inc (NYSE:GCAP), Immersion Corporation (NASDAQ:IMMR), and YRC Worldwide Inc (NASDAQ:YRCW).
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Senvest is a fund that we have been following for the last couple of years along with over 700 other investment firms. We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45 days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 144%, outperforming the S&P 500 ETF by nearly 85 percentage points (see more details here).
Coming back to Senvest’s holding in Marrone Bio Innovations Inc (NASDAQ:MBII), the fund initiated a holding in the $49.77 million provider of bio-based pest management and plant health products in the third quarter of 2014. The company’s stock has slumped by more than 60% since then. Since September last year, Marrone Bio Innovations Inc (NASDAQ:MBII) has been beleaguered by problems with its internal financial controls that date back to 2013. The company has also been facing a delisting possibility from the NASDAQ owing to its failure to file quarterly financial documents. However, in a recent letter to the company, The NASDAQ indicated that it will delay the delisting at least until a scheduled June 18 hearing. If the accounting issues end up getting resolved, something that Senvest is betting on, there is a considerable upside to Marrone Bio Innovations Inc (NASDAQ:MBII)’s stock price. Anand Parekh‘s Alyeska Investment Group is another stockholder of the company with 130,531 shares valued at $505,000.
Moving on to the fund’s top micro-cap stock picks, Senvest’s holding in Gain Capital Holdings Inc (NYSE:GCAP) remained unchanged during the first quarter and consists of 4.27 million shares valued at $41.72 million. The fund initiated a position in the provider of online foreign exchange trading in the last quarter of 2012, and the stock has appreciated by about 110% since then. Michael M. Rothenberg and David Slacker‘s Moab Capital Partners held some 623,900 shares of Gain Capital Holdings Inc (NYSE:GCAP) valued at $6.10 million at the end of the first quarter.
With 4.52 million shares valued at $41.46 million of Immersion Corporation (NASDAQ:IMMR), the company ranks as Senvest’s second largest micro-cap holding. The stake represents about 2.57% of the fund’s portfolio value. The fund has held a stake in the intellectual property and software licensing company focused on haptic innovations since the fourth quarter of 2005. So far this year Immersion Corporation (NASDAQ:IMMR)’s stock has appreciated by nearly 30%. Spencer M. Waxman‘s Shannon River Fund Management is another prominent stockholder of Immersion Corporation (NASDAQ:IMMR) with 2.60 million shares valued at $23.86 million at the end of March.
Senvest upped its stake in YRC Worldwide Inc (NASDAQ:YRCW) by 22% during the first quarter to 2.14 million shares valued at $38.39 million. The $491.95 million company operating in the trucking industry has seen its stock decline by over 33% year-to-date, while the industry as a whole has also suffered greatly, losing 11.68% during the same period. In its financial results for the first quarter of 2015, YRC Worldwide Inc (NASDAQ:YRCW) missed the estimates for both the top and bottom lines. Billionaire Marc Lasry’s Avenue Capital is the largest stockholder of YRC Worldwide Inc (NASDAQ:YRCW) within our database, with some 7.27 million shares valued at $130.63 million.
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