Monthly Newsletter - February 2024

Greetings,

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Congratulations on making it to February.? By now most of us have taken down the holiday decorations, given up on most of our New Year’s Resolutions, and no longer need to lie about partaking in “Dry January.”?

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The equity markets have continued their upward march into the new year, with the S&P 500 ending January up 1.6%.? Senet Capital’s equity positions have done well, and we took the opportunity to add to our long positions on days when the market sold off and replace shares that had been called away at the end of 2023.?

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We sold calls against our positions at strike prices three, five, and seven percent above where we started the year, and rolled our put options from a February expiration to a March expiration.? Lastly, we sold put options approximately 20 percent below current market levels, which generated extra income for the fund.

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We won’t belabor the latest economic data or the Federal Reserve commentary since information on both is in ample supply.? What we would like to highlight is something that is in relatively short supply: intelligence.? A common definition of intelligence is “the ability to acquire and apply knowledge and skills.”?

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On the other hand, we have artificial intelligence, one definition of which is “the?theory and development of computer systems able to perform tasks that normally require human intelligence.”?

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I bring this up because artificial intelligence (A.I.) is all around us in 2024.? It is a trending topic on news outlets. ?It is a significant driver of recent stock prices.? It is the focus of earnings reports and company disclosures.? And it is a topic we often get asked about as professional investors.

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Sure, technology can do a lot of things, and artificial intelligence could have some valuable real-world applications.? Agreed.?

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However, I will tell you some things technology and A.I. don’t seem to be able to do.? The first is drive a vehicle.? As we saw in 2023 when a GM Cruise driverless car hit a pedestrian and dragged her across a California highway, technology seems to be no better at driving than your teenage son as he scrolls through Tik Tok behind the wheel.?

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The second is drafting important documents, as attorneys Steven Schwartz and Peter LoDuca of Levindow, Levindow & Oberman can attest to after they used ChatGPT to help in drafting a legal brief to be used in a client’s personal injury case.? The result was a legal filing with six fictitious case citations and a subsequent fine from a United States District Judge for making false and misleading statements in court.

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The third is managing money.? We at Senet Capital have been asked when (not if) we will be replaced by Artificial Intelligence and here is our answer: we won’t.? Let’s look at the data.

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A Eurekahedge index of 12 funds using A.I. has trailed the broader hedge fund index by about 14 percent over the past five years.? And the performance discrepancy has gotten worse since 2021, not better, as one might expect as technology advances.? According to data generated by Plexus Investments, only 45% of A.I. funds outperform the benchmarks they decide to measure themselves against, presumably not the S&P 500.

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The silver lining of these results is that A.I. investment programs perform about as poorly as human stock pickers do.? Anyone who knows us already knows how we feel about individual stock pickers and their track record, so we will move on.

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While fads and the latest trends may dictate fashion choices or workout routines, don’t let them dictate how you invest your capital.? Senet Capital manages our investors’ money by investing in a basket of the best companies in the world, leveraging our upside to those companies, and limiting our downside.? Avoid market-timing, single stock selection, and hedge out catastrophic market risks.? Over time, this is how to generate market-beating returns that compound long term.

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If you are already invested in Senet Capital Enhanced Equity Fund, LP, we hope you have been pleased with our results so far.? If you have not yet incorporated our strategy into your allocations, please contact us and we would value the opportunity to discuss our strategy and investment methodology with you in more detail.

Happy hunting,

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David Jeffress and Jonathan Berkowitz