A hedge fund that made $700 million on its GameStop bet is now after unloved oil and gas stocks

• New York-based Senvest Management, a hedge fund that made $700 million on GameStop, is now chasing unloved energy stocks.
• There’s a “very solid outlook” for oil and gas stocks for another year or two, Senvest’s co-CIO told the FT.
• Canada-based energy firms Paramount Resources and Arc Resources are two of Senvest’s biggest positions.

One hedge fund that managed to walk away with a $700 million profit on its GameStop investment is now targeting beaten-down oil and gas stocks and says sustainability-focussed investors are missing the opportunity here.

New York-based hedge fund Senvest Management bet on GameStop even before the Reddit-fueled mania sent its stock soaring, and pocketed one of the great fortunes from the market frenzy.

Richard Mashaal, co-chief investment officer of Senvest, recently told the Financial Times that he now has a quarter of his portfolio in fossil fuel stocks.

The hedge fund’s interest highlights an investment push into secure sources of energy that are less vulnerable to geopolitical risks.

“The result of the ESG movement is that there’s been massive multiple compression [in oil and gas stocks] and we still haven’t come back from that,” Mashaal told the FT, adding that many oil and gas companies had felt they wouldn’t have access to investment capital.

“Now there are other countervailing interests, such as the security of energy supply, that have come to the fore and which are not going to go [away] anytime soon,” he said.

Senvest’s interest in GameStop was stirred by a convincing presentation from then-CEO George Sherman, but it decided to exit its position after Elon Musk’s “Gamestonk” tweet that helped extend the short squeeze, the Wall Street Journal reported.

Now Mashaal believes an increase in funding is required for the traditional energy sector to set right years of under-investment, the FT said.

“You’ve got a couple of years before a meaningful production response can be mounted to satisfy demand. There’s a very solid outlook [for oil and gas stocks] for another year or two,” he said.

Two of Senvest’s biggest positions are in Canadian energy firms Paramount Resources and Arc Resources, which Mashaal said are trading below the market value of their US peers. 

Both stocks are trading at roughly half their record prices, hit in 2014 and 2008 respectively.

Oil prices have hit 14-year highs above $100 a barrel on tough sanctions imposed against major producer Russia over its war in Ukraine. French commodities trader Pierre Andurand has predicted prices could hit $200, twice the current level, as Russian crude vanishes from the market.

Hedge funds based in the US and UK were already buying unloved oil and gas stocks discarded by ESG-focused investors, and reaped gains as energy prices rose, the FT reported in October.

“There’s a lot of room for multiple expansion [in these stocks],” Mashaal said, and added that high oil prices haven’t been fully accounted for in share prices.

“People realize this is not going away in the short or medium term. It’s not like ESG goes away, but we [now] need to balance it with energy security and where you want to buy your oil from,” he said.

Senvest didn’t immediately respond to Insider’s request for comment.

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