Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Mastech Digital, Inc. (NYSE:MHH).
Mastech Digital, Inc. (NYSE:MHH) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. Mastech Digital, Inc. (NYSE:MHH) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 4. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 3 hedge funds in our database with MHH holdings at the end of June. Our calculations also showed that MHH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding Mastech Digital, Inc. (NYSE:MHH).
What have hedge funds been doing with Mastech Digital, Inc. (NYSE:MHH)?
Heading into the fourth quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MHH over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the biggest position in Mastech Digital, Inc. (NYSE:MHH). Renaissance Technologies has a $3.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $0.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism contain Cliff Asness’s AQR Capital Management, Louis Navellier’s Navellier & Associates and . In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to Mastech Digital, Inc. (NYSE:MHH), around 0.07% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0036 percent of its 13F equity portfolio to MHH.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, assembled the most outsized position in Mastech Digital, Inc. (NYSE:MHH). AQR Capital Management had $0.5 million invested in the company at the end of the quarter. Louis Navellier’s Navellier & Associates also initiated a $0.3 million position during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Mastech Digital, Inc. (NYSE:MHH) but similarly valued. These stocks are Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), Organigram Holdings Inc. (NASDAQ:OGI), Vera Bradley, Inc. (NASDAQ:VRA), Misonix, Inc. (NASDAQ:MSON), BlueLinx Holdings Inc. (NYSE:BXC), Nesco Holdings, Inc. (NYSE:NSCO), and scPharmaceuticals Inc. (NASDAQ:SCPH). This group of stocks’ market caps are similar to MHH’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $5 million in MHH’s case. Vera Bradley, Inc. (NASDAQ:VRA) is the most popular stock in this table. On the other hand Organigram Holdings Inc. (NASDAQ:OGI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Mastech Digital, Inc. (NYSE:MHH) is even less popular than OGI. Our overall hedge fund sentiment score for MHH is 36. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards MHH. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately MHH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MHH investors were disappointed as the stock returned 1.7% since the end of the third quarter (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.