Earlier this week, investment firm Diamond Hill Capital (Trades, Portfolio) disclosed its portfolio for the second quarter, which ended June 30.
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 eight new positions during the quarter, sold out of nine stocks and added to or trimmed a slew of other existing investments. Notable trades included a new stake in Union Pacific Corp. (UNP, Financial), boosts to the Microsoft Corp. (MSFT, Financial) and SVB Financial Group (SIVB, Financial) holdings and a reduction of the Archer-Daniels Midland Co. (ADM, Financial) position. It also gained a stake in Take-Two Interactive Software Inc. (TTWO, Financial) following its acquisition of Zynga Inc. (ZNGA, Financial).
Investors should be aware that 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.
Union Pacific
The firm invested in 1.72 million shares of Union Pacific (UNP, Financial), giving it 1.61% space in the equity portfolio. The stock traded for an average price of $228.26 per share during the quarter.
The Omaha, Nebraska-based railroad company has a $149.42 billion market cap; its shares were trading around $239.32 on Thursday with a price-earnings ratio of 22.3, a price-book ratio of 11.77 and a price-sales ratio of 6.50.
The GF Value Line suggests the stock is fairly valued currently based on historical ratios, past financial performance and analysts’ projections of future earnings.
Further, the high GF Score of 93 out of 100 indicates the company has high outperformance potential. Union Pacific received perfect 10 out of 10 ranks for profitability and momentum, a score of 9 for growth, a 7 for GF Value and a middling mark of 4 for financial strength.
Of the gurus invested in Union Pacific, Ken Fisher (Trades, Portfolio) has the largest stake with 0.84% of its outstanding shares. PRIMECAP Management (Trades, Portfolio), First Eagle Investment (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also have notable positions.
Microsoft
Impacting the equity portfolio by 1.69%, Diamond Hill increased its Microsoft (MSFT, Financial) stake by 857.13%, buying 1.51 million shares. Shares traded for an average price of$271.99 each during the quarter.
The firm now holds 1.68 million shares total, accounting for 1.89% of the equity portfolio. GuruFocus estimates it has gained 96.21% on the long-held investment.
The software company, which is headquartered in Redmond, Washington, has a market cap of $2.14 trillion; its shares were trading around $287.02 on Thursday with a price-earnings ratio of 29.76, a price-book ratio of 12.87 and a price-sales ratio of 10.91.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 98 is indicative of high outperformance potential, having raked in a rank of 10 out of 10 for profitability and growth, a rating of 8 for financial strength and momentum and a grade of 7 for GF Value.
With a 0.38% stake, Fisher is the company’s largest guru shareholder. Other top guru investors include PRIMECAP, Dodge & Cox, Chase Coleman (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), First Eagle and Mairs and Power (Trades, Portfolio).
SVB Financial
With an impact of 1.25% on the equity portfolio, the firm upped its SVB Financial (SIVB, Financial) position by 343.62%, picking up 723,591 shares. During the quarter, the stock traded for an average per-share price of $472.45.
Diamond Hill now holds 943,172 shares total, which represent 1.61% of the equity portfolio. GuruFocus data shows it has gained an estimated 24.21% on the investment so far.
The Santa Clara, California-based bank holding company, which owns Silicon Valley Bank, has a $26.89 billion market cap; its shares were trading around $455.21 on Thursday with a price-earnings ratio of 17.53, a price-book ratio of 2.21 and a price-sales ratio of 4.37.
Based on the GF Value Line, the stock appears to be fairly valued currently.
The GF Score of 85 implies the company has good performance potential going forward. GuruFocus recorded growth and GF Value ranks of 9 out of 10, a momentum rank of 7, a profitability rank of 6 and a financial strength rank of 4.
Diamond Hill is SVB Financial’s largest guru shareholder with 1.58% of its outstanding shares. Fisher, Steven Cohen (Trades, Portfolio), Elfun Trusts (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and several other gurus also own the stock.
Archer-Daniels Midland
Diamond Hill curbed its investment in Archer-Daniels Midland (ADM, Financial) by 91.65%, selling 4.35 million shares. The transaction had an impact of -1.47% on the equity portfolio. The stock traded for an average price of $87.46 per share during the quarter.
The firm now holds 396,906 shares, which make up 0.13% of the equity portfolio. According to GuruFocus, it has gained an estimated 98.38% on the investment over its lifetime.
The consumer packaged goods company headquartered in Chicago, which processes oilseeds, corn, wheat and other agricultural commodities, has a market cap of $47.17 billion; its shares were trading around $84.14 on Thursday with a price-earnings ratio of 13.24, a price-book ratio of 1.93 and a price-sales ratio of 0.51.
The GF Value Line suggests the stock is modestly overvalued currently.
The GF Score of 82 indicates the company has good performance potential based on profitability and growth ranks of 7 out of 10, momentum and financial strength ranks of 6 and a GF Value rank of 5.
Of the gurus invested in Archer-Daniels Midland, Tom Gayner (Trades, Portfolio) has the largest stake with 0.26% of its outstanding shares. Murray Stahl (Trades, Portfolio) also has a significant position.
Zynga and Take-Two
The firm’s 31.33 million-share stake in San Francisco-based mobile game developer Zynga (ZNGA, Financial) was dissolved after its acquisition deal with Take-Two Interactive (TTWO, Financial) closed in May.
The cash-and-stock deal valued at $12.7 billion was announced in January. According to the terms of the agreement, Zynga shareholders received $3.50 in cash and $6.36 worth of Take-Two common stock per share owned.
As such, Diamond Hill gained a 1.56 million-share stake in Take-Two, dedicating 0.84% of the equity portfolio to the position.
GuruFocus estimates the firm lost 9.69% on the Zynga investment.
The video game holding company, which is headquartered in New York, has a $20.11 billion market cap; its shares were trading around $120.67 on Thursday with a price-earnings ratio of 79.39, a price-book ratio of 2.08 and a price-sales ratio of 3.88.
According to the GF Value Line, the stock is a possible value trap currently. As such, potential investors should do thorough research before making a decision.
The GF Score of 87, however, indicates it has good performance potential. GuruFocus rated its growth and financial strength 9 out of 10, its GF Value an 8, its profitability a 7 and its momentum a 4.
With a 1.05% stake, Bill Nygren (Trades, Portfolio) is Take-Two’s largest guru shareholder. Other guru shareholders include Halvorsen, PRIMECAP, Cohen, Ron Baron (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Dalio, Joel Greenblatt (Trades, Portfolio) and George Soros (Trades, Portfolio).
Additional trades and portfolio composition
During the quarter, Diamond Hill also established positions in HCA Healthcare Inc. (HCA, Financial) and Martin Marietta Materials Inc. (MLM, Financial), added to Amazon.com Inc. (AMZN, Financial), sold out of Charter Communications Inc. (CHTR, Financial) and reduced its holdings of Mondelez International Inc. (MDLZ, Financial) and Meta Platforms Inc. (META, Financial).
The firm’s $22.89 billion equity portfolio, which is composed of 169 stocks, is most heavily invested in the financial services sector with a 24.57% weight.
GuruFocus data shows Diamond Hill’s Small Cap Fund posted a 32.45% return in 2021, significantly outperforming the S&P 500’s 28.7% return.
