Citigroup (C) Supplanted Atop Diamond Hill Capital’s Portfolio in Q1

Founded in 2000 by Ric Dillon, Diamond Hill Capital employs a value investing approach to stock picking and had approximately $18 billion in assets under management at the end of April. Mr. Dillon and his team focus their investment efforts on a long-term horizon, which is reflected in the top holdings of Diamond Hill as disclosed in its latest 13F filing, with three out of the top five positions having been established more than nine years ago. At the end of March, the fund’s equity portfolio carried holdings valued at $15.7 billion, with roughly a quarter of that invested in financial stocks and 18% of it devoted to consumer discretionary stocks. Over the course of the first quarter, Mr. Dillon and his managing partner Chuck Bath have done some shaking up of Diamond Hill Capital’s equity portfolio. In this article we’ll take a closer look at some of those changes and the portfolio’s current constitution.

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Long-Term Energy Bet

First up is Cimarex Energy Co (NYSE:XEC), a Colorado-based oil and gas exploration company and one of Diamond Hill’s long-term investments, as the fund first reported a stake in the company at the end of 2003. Over the prevous quarter, the fund’s position in the stock was increased by 1% to 3.74 million shares worth approximately $363 million. Cimarex Energy Co (NYSE:XEC) recently reported first quarter results that missed Wall Street’s expectations. The company registered a loss of $186.1 million or $0.40 per share when adjusted for one-time costs, while revenue tumbled by 33% year-over-year to $240 million. Both figures were below analysts’ expectations, with them having anticipated a loss of $0.38 per share on the back of $248 million in revenue. As the stock was hammered from the middle of 2014 through the end of 2015 due to the slump in the oil markets, so too has it changed direction in 2016 thanks to oil’s modest recovery, with the stock currently up by 29% this year. Curtis Schenker and Craig Effron’s Scoggin holds a small stake in Cimarex Energy Co (NYSE:XEC) of 68,625 shares worth $6.67 million on March 31.

UTX Stake Reduced

Mr. Dillon and his team decided to reduce the fund’s holding in United Technologies Corporation (NYSE:UTX) by 4% to 3.73 million shares valued at $373 million at the end of March. According to a recent note to investors, analysts at RBC Capital have cut their rating on United Technologies Corporation (NYSE:UTX) to ‘Sector Perform’ from ‘Outperform’ and reduced their price target to $108 per share from $109. The company reported first quarter results at the end of April, which amounted to a 16% drop in profit, while sales were flat. Nonetheless, the revenue of $13.4 billion and adjusted earnings of $1.47 per share managed to top analysts’ estimates of $13.03 billion in revenue and earnings of $1.38 per share. The results had additional significance after the company’s merger talks with Honeywell International Inc. (NYSE:HON) fell through in early March. Billionaire Ken Fisher‘s Fisher Asset Management indicated a 2% increase to its holding of United Technologies Corporation (NYSE:UTX) in its latest 13F filing, to 8.37 million shares worth $875 million at the end of March.

Head over to the next page to find out about Diamond Hill Capital’s top-3 positions.