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Merion Road Capital Sees a Bright Future in Mastech Digital Inc. (MHH)

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Jose Karlo Mari Tottoc
·4 min read
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Merion Road Capital Management, an investment management firm, published its fourth-quarter 2020 Investor Letter for its ‘MRCM Long Short Small Cap’ and ‘MRCM Long Only Large Cap’– a copy of which can be downloaded here. A return of 11.5% was recorded by its Long Short Small Cap fund for the Q4 of 2020, outperforming its Barclay Hedge Fund index that made a 9% return, but below its Russell 2000 benchmark that delivered 31.3%. Its Long Only Large Cap fund delivered a 21.2% return, above its S&P 500 benchmark that accumulated 12.1%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Merion Road Capital Management, in their Q4 2020 Investor Letter, said that Mastech Digital, Inc. (NYSE: MHH) was their largest contributor during the fourth quarter of 2020. Mastech Digital, Inc. is a digital transformation and information technology services company that currently has a $192 million market cap. For the past month, MHH delivered a -3.87% return and settled at $16.88 per share at the closing of February 11th.

Here is what Merion Road Capital Management has to say about Mastech Digital, Inc. in their Q4 2020 investor letter:

"The small cap portfolio was up 29% net of fees in 2020 while averaging a beta adjusted net exposure of 42%. Our largest contributor during the year was our largest contributor last year as well, Mastech Digital (“MHH”). Our position in MHH has fluctuated since I first bought the stock back in 2018. You may recall that I initially acquired the stock upon their acquisition of Infotrellis, a data and analytics company, as I did not believe the market was valuing the combined entity correctly. This year I added as the stock sold off in March and April, and even more ahead of the Russell rebalance as I correctly forecasted their inclusion. With a now delevered balance sheet MHH has recently announced and completed another acquisition of a company called Amberleaf. Amberleaf will serve as a bolt-on to MHH’s data and analytics division addressing the sales, marketing, and customer acquisition vertical. Based on management commentary we can estimate that the transaction was completed at an attractive multiple of just 5.5x EBITDA. So far, the market has not given the company much credit for this latest transaction, but it will be hard to ignore as the company begins to report consolidated figures."

Major Retailers and Services That Accept Bitcoin in 2018
Major Retailers and Services That Accept Bitcoin in 2018

alphaspirit/Shutterstock.com

Last November, we published an article telling that Mastech Digital, Inc. (NYSE: MHH) was in 4 hedge fund portfolio, its all time high statistics. MHH delivered a 5.76% return in the past 12 months.

Our calculations show that Mastech Digital, Inc. (NYSE: MHH) does not belong in our list of the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

https://youtu.be/OgBhPDmWMtI

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website.

Disclosure: None. This article is originally published at Insider Monkey.