The manager of 2021's top-performing hedge fund on his winning GameStop trade and lessons from it

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On this day last year, investors watched in amazement as GameStop shares surged to a record high of $347.51. The stock had skyrocketed amid a trading frenzy brought on by retail investors swapping stock tips — and related memes — on social media. 

Professional investors also got in on the action but not all of them were on the short side of the trade. GameStop became Senvest Management's single best trade of all time, notching $700 million in profit for the firm. Those gains contributed to Senvest's more than 85% returns last year, making it the top performing hedge fund of 2021. 

Senvest Founder & CEO Richard Mashaal sat down with CNBC's Delivering Alpha newsletter to discuss how he navigated his firm's position in GameStop and shared lessons he learned along the way. 

(The below has been edited for length and clarity. See above for full video.)

Leslie Picker: You had been invested in GameStop for months prior to the frenzy that we saw in January 2021. Did you know what would happen?

Richard Mashaal: Surely we didn't know what would happen but you know, we did get in in September. So that was September [2020], so well before the stock caught fire, and it's a classic contrarian play for us. There's one word that's synonymous with Senvest: it's contrarian. That's what we look for — things that are really out of favor that have the potential to come back into favor. And we saw that kind of setup there.

Picker: You were looking at the short interest as well, which I think was similar to some of the back and forth that we saw over the Reddit forums with the retail investors. How do you kind of look at those things when making a decision to invest in a company