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Diamond Hill Capital´s Returned More than 10% in the Recent Quarter
Posted by: Vanina Egea (IP Logged)
Date: February 25, 2014 05:18PM
Over the past days hedge funds have been filing their form 13-F, which is a quarterly report of equity holdings by filed institutional investment managers with at least $100 million in equity assets under management, as required by the United States Securities and Exchange Commission (SEC). In this article, let´s concentrate in one particular hedge fund and try to see the principal holdings in its portfolio. I will look into Diamond Hill Capital (Trades, Portfolio) Management Inc. (DHIL). The fund is a registered investment adviser based in Columbus, Ohio and it is independent and publicly owned, listed on NASDAQ and included in the Russell 2000 Index.
Recently the fund reported its equity portfolio, as at the end of last year. The total value of the portfolio amounted to $10.9 billion, up from $9.9 billion disclosed at the end of the previous quarter. Consequently, the fund's total return was 10.4% in the last quarter. The filing revealed that at the end of last year, the fund added 12 new positions to its equity portfolio, and sold out of 8 other companies. The top ten portfolio holdings as of the end of the quarter represented 25.57%. The largest changes from previous 13-F´s fillings is in the financial sector (1.2%) followed by Industrials stocks (0.5%).
In this article, we have selected three companies, in which the fund holds the largest stakes, in terms of market value.
The first on the list is United Technologies Corp. (UTX), in which Diamond Hill disclosed a $320.69 million stake with over 2.82 million shares. The company is a diversified business conglomerate serving various end-markets such as aerospace, defense and commercial construction. The company is able to invest in longer-term platforms due to its strong cash generation. The most recent success of this innovation has been Pratt & Whitney's successful re-entry into the narrow-body aircraft engine market. In the last quarter of 2013, the firm reported huge earnings per share improvement in the most recent quarter compared to the same quarter a year ago. United Technologies increased its bottom line by earning $6.22 versus $5.35 in the prior year. It has a proven commitment to returning cash to investors, with a current dividend yield of 2.03%.
Other hedge fund gurus have also been active in the company. David Dreman (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Jim Simons (Trades, Portfolio), Ray Dalio (Trades, Portfolio), John Burbank (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio) have invested in it in Q4 2013.
JPMorgan Chase & Co. (JPM) comes in next, the fund owning over 4.87 million shares, worth $284.8 million. The company reported earnings per share decreased by 0.5% compared to the same quarter one year prior, but beat the Zacks Consensus Estimate by 4.0%. The company returns cash to investors. It raised its quarterly dividend by 26.7% to $0.38 per share. The current dividend yield is 2.5%, which is considered quite enough to protect the purchasing power. In the recent past, a pact of $13 billion settlement with the U.S. government, resolved mortgage-related issues. Also, JPMorgan´s credit quality continues to normalize.
In Pfizer Inc. (PFE), Diamond Hill disclosed ownership of over 8.34 million shares, with a reported value of $255.43 million. It also reported Q4 EPS above the Zacks Consensus Estimate. Pfizer also pays a dividend and is currently yielding 3.1%. The company returned about $15 billion to shareholders (dividends and share buybacks) in 2012.
In the next chart we can appreciate the stock’s price movement. All of them have an upward trend for the 5-year period.
The three stocks are certainly attractive for fundamental investors and make it a worthy investment for Diamond Hill Capital (Trades, Portfolio)’s portfolio. In future articles we are going to calculate the intrinsic value of these stocks to determine if they are a good buy in terms of valuation.
Disclosure: Vanina Egea holds no position in any stocks mentioned.
Guru Discussed: Diamond Hill Capital: Current Portfolio, Stock Picks
David Dreman: Current Portfolio, Stock Picks
Stocks Discussed: DHIL, UTX, JPM, PFE,