- New York-based Senvest Management, a hedge fund that made $700 million on GameStop, is now hunting down unloved energy stocks.
- There is a “very strong outlook” for oil and gas stocks for another year or two, Senvest’s co-CIO told the FT.
- Canadian energy companies Paramount Resources and Arc Resources are two of Senvest’s largest holdings.
A hedge fund that managed to walk away with a $700 million profit on its investment in GameStop is now targeting battered oil and gas stocks and says sustainability-focused investors are missing the opportunity here.
New York-based hedge fund Senvest Management bet on GameStop even before the Reddit-fueled mania skyrocketed its stock and pocketed one of the big fortunes from the market frenzy.
Richard Mashaal, co-chief investment officer of Senvest, recently told the Financial Times that he now holds a quarter of his portfolio in fossil fuel stocks.
The hedge fund’s interest highlights an investment push toward sources of energy that are secure and less vulnerable to geopolitical risks.
“The result of the ESG movement is that there has been a massive multiple compression [in oil and gas stocks] and we are still amazed,” Mashaal told the FT, adding that many oil and gas companies felt they would not have access to investment capital.
“Now there are other conflicting interests, such as the security of energy supply, which have come to the fore and which are not going to go away. [away] soon,” he said.
Senvest’s interest in GameStop was sparked by a compelling pitch from then-CEO George Sherman, but he decided to quit after Elon Musk intervened. Tweet “Gamestonk” this helped extend the short period of compression, the Wall Street Journal reported.
Now Mashaal believes increased funding is needed for the mainstream energy sector to fix the good years of underinvestment, the FT said.
“You have a few years before a significant production response can be mounted to meet demand. There are very good prospects [for oil and gas stocks] another year or two,” he said.
Two of Senvest’s largest positions are in Canadian energy companies Paramount Resources and Arc Resources, which Mashaal says are trading below market value than their US counterparts.
Both stocks are trading at around half of their all-time highs, reached in 2014 and 2008 respectively.
Oil prices hit 14-year highs above $100 a barrel following tough sanctions imposed on Russia’s top producer for its war in Ukraine. French commodity trader Pierre Andurand predicted that prices could reach $200, double the current level, as Russian crude disappears from the market.
US and UK-based hedge funds were already buying unloved oil and gas stocks shunned by ESG-focused investors, and reaping gains as energy prices rose, reports the FT in October.
“There is plenty of room for multiple expansion [in these stocks]“Mashaal said, and added that high oil prices have not been fully priced into stock prices.
“People are realizing that it’s not going to go away in the short to medium term. It’s not like ESG is going away, but we [now] have to balance it with energy security and where you want to buy your oil,” he said.
Senvest did not immediately respond to Insider’s request for comment.
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