Maran Capital: ‘RCM Technologies (RCMT) has A Meaningful Cash Generation’

Maran Capital Management LLC, a value-driven, concentrated, long-term investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A return of 14.8% was recorded by the fund for the Q4 of 2020, outperforming its S&P 500 benchmark that delivered a 12.15% return, but below its Russell 2000 index that returned 31.4%. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Maran Capital Management, in their Q4 2020 Investor Letter said that they added their positions in RCM Technologies, Inc. (NASDAQ: RCMT) and that they continue to expect the best for the company. RCM Technologies, Inc. is world-class business and technology solutions company that has a $32.7 million market cap. For the past 3 months, RCMT delivered a massive 140.39% return and settled at $3.08 per share at the closing of February 2nd.

Here is what Maran Capital Management has to say about RCM Technologies, Inc. in their investor letter:

“We have held a position in RCMT for several years. While I added to the position last year, it remains outside of our top five (and a net detractor from fund performance to date). I laid out my thesis in my 3Q 2019 letter, and, despite Covid’s negative effects on RCMT’s nurse-staffing business (whose primary customers are school districts), my thesis (based on normalized levels of sales and profitability) is still intact. Despite the Covid-related headwinds, RCMT pulled a number of value-creation levers last year, including meaningful cash generation and the repurchase of a significant amount of stock at a very attractive price.

Through the first nine months of 2020, RCMT generated over $20mm of net cash, or ~$1.75/sh, while also reducing the share count by over 12% (RCMT repurchased 1.9mm shares).

When I discussed RCMT in the fall of 2019, I estimated that the three segments were together worth $125mm based on normalized levels of segment sales and profitability. Net of debt and on the share count at the time, this implied $8.50/sh of value for the stock. Updated for the meaningful share count reduction, this would now imply a fair value of $10/sh.”

RCMT delivered a 9.25% return in the past 12 months. However, our calculations show that RCM Technologies, Inc. (NASDAQ: RCMT) 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

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