Hunter Peak's Karsch says Houghton Mifflin Harcourt could double in 12 months

LONDON (Reuters) - Michael Karsch, chief executive of U.S. hedge fund firm Hunter Peak Investments, said he has bought shares in U.S. school textbooks provider Houghton Mifflin Harcourt and thought its stock could double in value over the next 12 months.

Speaking at the Sohn Conference in London, he said the firm was undervalued as the market thought it was vulnerable to digital challenge, had complicated accounts and believed recent earnings weakness would be continued.

Karsch, however, said there was little scope for a digital challenger in the market, the firm's free cash-flow was not as bad as some feared, and its lumpy earnings were not evidence of structural problems.

Calling the fourth-quarter a "turning point", he said he saw a return to growth in 2016 and the possibility that the management could buy back 20 percent of their stock over the next 12 months.

(Reporting by Simon Jessop)

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