As we disclosed this morning to our premium members, we do not currently have a long position in Mastech Holdings (NYSE AMEX) ($8.95). However, we are closely tracking recent developments.

Mastech Developments We’re Tracking

Prior to rebuilding a long position we need to interview management in order to determine:

  • If margins can improve to levels they were at before recent operational problems were encountered.
  • Why it believes a recent acquisition will be accretive to earnings, given that the parent company has a history of losing money and is expected to lose money through 2016.

After rising 317% within the first year as a GeoBargain, MHH shares slowly retraced to current levels. Shares of MHH have not been a timely investment over the last several quarters. Financial results were impacted by poor execution on some of the company’s projects. You can see more on this issue from the company’s comments in its Q2 2014 release here. In our 10/23/2014 email we stated :

“…we would begin to slowly rebuild a small position in shares of MHH and stated it’s possible that a bullish position in MHH will require some investor patience for two quarters while management proves it can begin to deliver growth again.”

Management claims to have addressed the issues that were impacting its operations and is optimistic about its prospects moving forward. More importantly, MHH recently closed the acquisition of a subsidiary of Hudson Global (HSON), which is expected to immediately be accretive to earnings.  Here are some quotes from the Q1 2015 release:

“This acquisition will provide Mastech with an impressive list of direct retail client relationships. We plan to maintain this relationship-focused business and all of its sales and recruiting staff. Additionally, we believe that there will be opportunities to leverage the advantages of Mastech’s high-volume, low cost recruiting engine to enhance client value. I am very excited about this opportunity, which is expected to be immediately accretive to earnings and is estimated to increase Mastech’s revenue run-rate by close to 30 percent.”

Here’s a statement regarding improving business and restructuring:

“With our leadership changes and organizational realignments in place, I am starting to see clear improvements in the business as we enter the second quarter.”

We first coded MHH as a GeoBargain on 12/19/2012 when the stock was trading at $4.40 (adjusted for 4 for 5 split and $2.00 special dividend). At its highs, MHH’s peak return was over 350%.

Want to Know When We’re on the Hunt for the Next GeoBargain?

To stay ahead of the market with GeoInvesting arbitrage and learn about investment ideas not yet digested by the market, Sign up now for More Research and Insight