Earlier this week, investment firm Diamond Hill Capital (Trades, Portfolio) disclosed its equity portfolio for the first quarter, which ended March 31.
The Columbus, Ohio-based firm, which was founded in 2000, seeks to align employee interests with those of its investors by investing in the same portfolios. Its strategy to maintain a long-term focus is based on fundamental, ground-up analysis of a company's intrinsic value, as determined by factors such as market position, competition, management, valuation and growth prospects. The firm also focuses on buying undervalued companies that have a solid and proven foundation for revenue production.
Based on these criteria, the firm disclosed in its 13F report it established seven new positions during the quarter, sold out of 10 stocks and added to or trimmed a slew of other existing investments. Notable trades included new stakes in Allstate Corp. (ALL, Financial) and Lear Corp. (LEA, Financial), a reduction of the Booking Holdings Inc. (BKNG, Financial) holding and the divestment of First Republic Bank (FRCB, Financial) and Linde PLC (LIN, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Allstate
Diamond Hill invested in 3.01 million shares of Allstate (ALL, Financial), allocating 1.56% of the equity portfolio to the stake. The stock traded for an average price of $126.41 per share during the quarter.
The Northfield Township, Illinois-based property and casualty insurance company has a $31.25 billion market cap; its shares were trading around $118.88 on Friday with a price-book ratio of 2.01 and a price-sales ratio of 0.60.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 69 out of 100, the GF Score indicates the company has poor performance potential. While it raked in a high GF Value rank, the profitability, growth and financial strength ratings are more moderate and momentum is low.
Of the gurus invested in Allstate, Barrow, Hanley Mewhinney & Strauss has the largest stake with 1.65% of its outstanding shares. Louis Moore Bacon (Trades, Portfolio), Robert Bruce (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Mario Gabelli (Trades, Portfolio) and John Hussman (Trades, Portfolio), among others, also own the stock.
Lear
The firm picked up 1.42 million shares of Lear (LEA, Financial), dedicating 0.93% of the equity portfolio to the stake. Shares traded for an average price of $138.22 each during the quarter.
The company headquartered in Southfield, Michigan, which manufactures automotive seating and electrical systems and components, has a market cap of $7.29 billion; its shares were trading around $123.55 on Friday with a price-earnings ratio of 17.50, a price-book ratio of 1.50 and a price-sales ratio of 0.35.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 82 implies the company has good outperformance potential on the back of high ratings for profitability, GF Value and momentum and more moderate financial strength and growth ranks.
With an 11.61% stake, Richard Pzena (Trades, Portfolio) is the company’s largest guru shareholder. Other top guru investors include Paul Tudor Jones (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Bacon, Joel Greenblatt (Trades, Portfolio), Hotchkis & Wiley and Jeremy Grantham (Trades, Portfolio).
Booking Holdings
The firm’s Booking Holdings (BKNG, Financial) position was slashed 95.81%, selling 138,563 shares. The transaction had an impact of -1.26% on the equity portfolio. The stock traded for an average per-share price of $2,433.33 during the quarter.
It now holds 6,053 shares, which make up 0.08% of the equity portfolio. GuruFocus estimates the firm has gained 27.98% on the investment so far.
The Norwalk, Connecticut-based company, which operates online platforms for booking travel reservations, has a $97.48 billion market cap; its shares were trading around $2,639.27 on Friday with a price-earnings ratio of 25.88, a price-book ratio of 91.45 and a price-sales ratio of 5.71.
Based on the GF Value Line, the stock appears to be modestly undervalued currently.
The company has good outperformance potential with a GF Score of 84, driven by high ratings for three of the criteria and more moderate growth and financial strength ranks.
Dodge & Cox is the company’s largest guru shareholder with 2.15% of its outstanding shares. Booking Holdings is also being held by Baillie Gifford (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Pzena, Yacktman Asset Management (Trades, Portfolio) and Bill Nygren (Trades, Portfolio), among others.
First Republic Bank
Due to the turmoil in the banking sector in March, Diamond Hill dumped all 2.12 million shares of First Republic Bank (FRCB, Financial), impacting the equity portfolio by -1.18%. The stock traded for an average price of $102.49 per share during the quarter.
GuruFocus data shows the firm gained an estimated 39.96% on the investment over its lifetime.
The commercial bank headquartered in San Francisco, which finally failed at the beginning of May after months of effort to keep it afloat, has a market cap of $75.05 million; its over-the-counter shares were trading around 40 cents on Friday with a price-earnings ratio of 0.05, a price-book ratio of 0.01 and a price-sales ratio of 0.01.
After a strong start to the year, the stock took a dive in March following the failure of SVB Financial’s Silicon Valley Bank (SIVBQ, Financial).
Following its closure on May 1, the majority of First Republic’s assets and deposits were sold to JPMorgan Chase & Co. (JPM, Financial). The stock still trades over the counter after being kicked off the New York Stock Exchange.
Other gurus who proactively sold out of the stock before its demise included Elfun Trusts (Trades, Portfolio), Wallace Weitz (Trades, Portfolio) and Dalio’s firm.
Linde
The firm exited its 753,799-share holding of Linde (LIN, Financial), which had an impact of -1.12% on the equity portfolio. During the quarter, shares traded for an average price of $334.89 each.
GuruFocus found Diamond Hill gained an estimated 114.07% on the long-held investment.
The U.K.-based chemical company has a $179.61 billion market cap; its shares were trading around $366.86 on Friday with a price-earnings ratio of 40.72, a price-book ratio of 4.50 and a price-sales ratio of 5.49.
The GF Value Line suggests the stock is fairly valued currently.
According to the GF Score of 84, the company has good outperformance potential due to high ratings for profitability, growth and momentum, middling marks for financial strength and a low GF Value rank.
Holding a 0.28% stake, Dodge & Cox is Linde’s largest guru shareholder. Linde is also being held by PRIMECAP Management (Trades, Portfolio), Elfun Trusts (Trades, Portfolio), Gayner, Weitz, Jones and several other gurus.
Additional trades and portfolio composition
During the quarter, Diamond Hill also added to its holdings of Regal Rexnord Corp. (RRX, Financial), Chevron Corp. (CVX, Financial), Truist Financial Corp. (TFC, Financial) and American International Group Inc. (AIG, Financial), while curbing its positions in Alphabet Inc. (GOOGL, Financial), Berkshire Hathaway Inc. (BRK.B, Financial) and Texas Instruments Inc. (TXN, Financial). Its investment in SBV Financial was also closed.
The firm’s $21.36 billion equity portfolio, which is composed of 166 stocks, is most heavily invested in the financial services sector with a 23.61% weight.
GuruFocus data shows Diamond Hill’s Small Cap Fund posted a -15.02% return in 2022, slightly outperforming the S&P 500’s -18.11% return.
