In this article, we will discuss the Diamond Hill Capital Stock Portfolio: Top 10 Stock Picks.
Heather Brilliant, CFA, serves as CEO for Diamond Hill Capital and joined the firm in 2019, bringing over 20 years of domestic and international investment industry experience to this role. Most recently, she was the CEO of Americas with First State Investments. Before that role, she dedicated ~14 years with Morningstar where she was Global Head of Equity & Credit Research before advancing to CEO of Morningstar Australasia. Established in 1997, Diamond Hill Capital Management is a distinguished hedge fund manager based in Ohio.
Investment Philosophy & Process
Diamond Hill Capital has consistently applied an intrinsic value investment philosophy since its founding. The investment management firm focuses on buying ownership stakes in businesses that trade for less than what they are worth and then wait for that value to be realized over time. Under its intrinsic value philosophy, the firm treats every investment as a partial ownership interest in that organization and invests with a margin of safety. Apart from these, the firm possesses a long-term temperament (five years or longer) and believes that market price and intrinsic value will converge within an appropriate time frame. As of February 28, the investment management firm had assets under management of ~$30.9 billion.
Of the total AUM, ~$17.8 billion is allocated to large-cap strategy. Notably, around 23.1% is invested in the financial sector, while the industrial sector made up ~17.5%, as of December 31.
Diamond Hill Capital’s Equity Market Outlook
While several investors remain optimistic about the possibly more accommodative regulatory environment and tax cuts, Diamond Hill Capital believes the fact that the majority of the stocks aside from mega-cap technology companies gave back most of their Q4 2024 gains, which hints about optimism being outweighed by worries related to the potential for policy proposals in fields such as tariffs, taxes, and immigration to spur inflation. Moving forward, the investment management firm plans to assess government policies’ potential impacts, which can vary widely throughout businesses and industries. The company plans to seek attractive opportunities that trade at valuations it finds compelling relative to its estimates of intrinsic value and with the potential to deliver above-average returns.
With this in mind, let us now have a look at the Diamond Hill Capital Stock Portfolio: Top 10 Stock Picks.
Our Methodology
To list the Top 10 Stock Picks of Diamond Hill Capital, we selected the top 10 stocks in Diamond Hill Capital’s portfolio as per its Q4 2024 13F filing. We settled on the hedge fund’s 10 biggest holdings. Finally, we ranked the stocks in ascending order based on the value of Diamond Hill Capital’s equity stakes. Additionally, we have mentioned the hedge fund sentiment around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Diamond Hill Capital Stock Portfolio: Top 10 Stock Picks
10. CarMax, Inc. (NYSE:KMX)
Diamond Hill Capital’s Stake Value: $508.6 million
Number of Hedge Fund Holders: 57
CarMax, Inc. (NYSE:KMX) operates as a retailer of used vehicles and related products. The company has had its price target upgraded by Needham to $101 from the prior target of $98. The research firm reiterated a “Buy” rating. The firm cited the positive outlook for the broader used auto market and the company’s performance. The research firm’s analysis hints at the favorable conditions in H2 2024 continuing into the beginning of 2025, with industry unit gains and mainly CarMax, Inc. (NYSE:KMX)’s unit and share gains contributing to the better fixed cost absorption.
Furthermore, the firm’s analysts demonstrated the potential for the used auto market to be a tariff-safe haven as compared to new vehicles. This can influence consumer purchase decisions, transitioning the economics in favour of used vehicles. Overall, the analysts continue to place CarMax, Inc. (NYSE:KMX) favorably in the market, with anticipations for continued growth and performance over the upcoming years. Also, CarMax, Inc. (NYSE:KMX)’s omnichannel strategy places it well to capitalize on changing consumer preferences in the broader used vehicle market.
9. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC)
Diamond Hill Capital’s Stake Value: $513.02 million
Number of Hedge Fund Holders: 46
SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) offers software products and software-enabled services to financial services and healthcare industries. RBC Capital upped the company’s price objective to $96 from $86, keeping an “Outperform” rating after the Q4 earnings beat. The analyst believes that organic growth accelerated and seems to be attaining more sustainable levels as compared to the past years as SS&C Technologies Holdings, Inc. (NASDAQ:SSNC)’s investment cadence on new products and services, pricing discipline, and broader health of its clients remains supportive of organic growth.
Notably, the company saw Q4 2024 adjusted organic revenue growth of 7.0% and record adjusted consolidated EBITDA of $599 million. Overall, the company continued to add to its capabilities, integrate its offerings, and unlock the cross-sell benefits. Elsewhere, Needham analysts upped the price objective on SS&C Technologies Holdings, Inc. (NASDAQ:SSNC)’s stock to $105 from the previous target of $90, while maintaining a “Buy” rating. The firm’s analysts noted the possibility of above-trend organic growth, and margin expansion, together with an efficient strategy for capital deployment. Therefore, the analysts remain confident in SS&C Technologies Holdings, Inc. (NASDAQ:SSNC)’s growth trajectory and future performance.
8. Sysco Corporation (NYSE:SYY)
Diamond Hill Capital’s Stake Value: $551.04 million
Number of Hedge Fund Holders: 41
Sysco Corporation (NYSE:SYY) is engaged in the marketing and distribution of various food and related products to the food service or food-away-from-home industry. As per Fitch Ratings, the company has a robust competitive position, aided by the leading market position, operational scale, and healthy operating momentum. Furthermore, the company remains well-placed to witness share gains and generate strong FCF. Despite the negative US industry traffic trends, Sysco Corporation (NYSE:SYY) continues to experience healthy operating momentum, thanks to its ongoing strategic investments and initiatives throughout the supply chain, digital platform, and sales force, says Fitch Ratings.
Elsewhere, analyst Edward Kelly from Wells Fargo maintained a “Buy” rating on the company’s stock, increasing the price objective to $87.00 from $82.00. The analyst believes that Sysco Corporation (NYSE:SYY)’s efforts to expand the sales force and address pricing model issues can result in significant improvements in sales productivity and local case growth. Furthermore, the company’s recent management changes and strategic adjustments can improve its competitive positioning, providing a favorable risk/reward scenario.
Heartland Advisors, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
Consumer Staples. Our 10 Principles of Value Investing™ require us to be patient and wait for a combination of factors to fall into place before committing to a stock. Among them are attractive valuations, sound finances, capable management teams, sound business strategies, catalysts for recognition, and positive earnings dynamics. Sysco Corporation (NYSE:SYY) is an example of our willingness to wait.
While we purchased shares of the nation’s largest food service distributor in the fourth quarter, we’ve been watching the company’s self-help strategy unfold for years. Recovering from an awful COVID-19-era operating environment, Sysco has been responding with sweeping improvements in its digital capabilities along with changes to sales management and cost containment. Recently, the company — which delivers ingredients and food products to restaurants while avoiding slower-growing grocery stores — has been making a push to grow its specialty platform, offering services such as pre-cut meat, pre-cut produce, and dry aged beef to help customers streamline their operations. When the company’s restaurant, hotel, and food service clients utilize Sysco’s specialty services, they tend to spend three times more than traditional broadline customers…” (Click here to read the full text)
7. General Motors Company (NYSE:GM)
Diamond Hill Capital’s Stake Value: $592.5 million
Number of Hedge Fund Holders: 68
General Motors Company (NYSE:GM) is engaged in designing, building, and selling trucks, crossovers, cars, and automobile parts. Piper Sandler analyst Alexander Potter upped the company’s price objective to $48 from $45, keeping a “Neutral” rating. As per the analyst, the company has managed to establish itself as the best Detroit-based automaker. Furthermore, the research firm opines that General Motors Company (NYSE:GM)’s buybacks and a low multiple offer downside protection. Through the integration of Cruise technology into the ADAS offerings, the company can enhance its Super Cruise system, which will make it more competitive in the advanced driver assistance market.
The integration can result in improved safety features, better autonomous capabilities, and higher customer satisfaction. Also, it can enable General Motors Company (NYSE:GM) to command premium pricing for vehicles that are equipped with advanced ADAS features, resulting in increased margins. The incorporation of Cruise technology can ramp up General Motors Company (NYSE:GM)’s development of fully autonomous vehicles in the future, providing a competitive edge in the emerging market segment.
Diamond Hill Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Among our top individual contributors in Q4 were General Motors and Amazon. Automobile manufacturer General Motors Company (NYSE:GM) has allocated its capital well, repurchasing shares at a high rate and creating significant shareholder value. With a strong balance sheet, the company is well positioned to continue driving shareholder value for the foreseeable future. Further, there is some investor optimism about GM’s profitability as EV demand has stalled.”
6. Texas Instruments Incorporated (NASDAQ:TXN)
Diamond Hill Capital’s Stake Value: $633.47 million
Number of Hedge Fund Holders: 66
Texas Instruments Incorporated (NASDAQ:TXN) is engaged in designing, manufacturing, and selling semiconductors to electronics designers and manufacturers. Citi Research named the company as its top pick after mentioning that it possesses the best risk-reward ratio compared to other analog semiconductor stocks. Analysts, led by Christopher Danely, are optimistic regarding the broader analog sector as they opine that inventory levels are low, the sales are about to recover, and profit margins and EPS have likely bottomed out. Therefore, they project upside revisions to consensus estimates. Also, analysts are seeing early signs of this recovery. Texas Instruments Incorporated (NASDAQ:TXN)’s exposure to large, fast-growing markets and its robust portfolio of analog and embedded place it well to capture the opportunity ahead.
Texas Instruments Incorporated (NASDAQ:TXN) is ~70% through its 6-year elevated CapEx cycle which, when completed, can uniquely position the company. Furthermore, the company has debuted new power-management chips to support the growing power needs of modern data centers. Diamond Hill Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Other bottom Q4 contributors included Extra Space Storage, Texas Instruments Incorporated (NASDAQ:TXN) and Union Pacific. Semiconductor manufacturer Texas Instruments saw weaker demand in Q4, which pressured shares. However, we expect these demand trends to be transitory and maintain our favorable outlook on the company’s long term prospects and superior competitive position.”
5. ConocoPhillips (NYSE:COP)
Diamond Hill Capital’s Stake Value: $633.5 million
Number of Hedge Fund Holders: 86
ConocoPhillips (NYSE:COP) is a US-based independent exploration and production firm. UBS analysts maintained the “Buy” rating on the company’s stock with a constant price objective of $137.00. The analysis demonstrates that the company is the most favorably positioned Large Cap Oil Exploration & Production (E&P) company for the years to come. The optimism for ConocoPhillips (NYSE:COP) is backed by 4 principal factors that set the company apart from its competitors. These include its depth of resources in North America, healthy balance sheet, attractive shareholder return profile, and extensive backlog of long-cycle projects. Notably, these projects are expected to fuel tangible cash flow growth.
Elsewhere, JPMorgan reiterated an “Overweight” rating on the company’s stock, setting the price objective of $127.00. The analysts have noted ConocoPhillips (NYSE:COP)’s defensive nature of its portfolio, featuring a healthy balance sheet, low sustaining capital expenditures, as well as a low-cost resource base. In the context of the mixed broader macroeconomic environment, the firm opines that E&P companies possessing healthy defensive characteristics remain well-placed to navigate uncertainty. For 2025, ConocoPhillips (NYSE:COP) provided production guidance of 2.34 – 2.38 million barrels of oil equivalent per day (MMBOED), including the impacts of 20 MBOED from planned turnarounds.
4. Bank of America Corporation (NYSE:BAC)
Diamond Hill Capital’s Stake Value: $677.7 million
Number of Hedge Fund Holders: 113
Baird analyst David George upgraded Bank of America Corporation (NYSE:BAC)’s stock from “Neutral” to “Outperform,” increasing the price objective to $50.00 from the previous target of $45.00. The upgrade demonstrated the firm’s confidence in the company’s financial prospects. The analyst highlighted the strength of Bank of America Corporation (NYSE:BAC)’s deposit franchise, relatively low credit risk, and consistent execution, together with strong markets businesses. Elsewhere, Fitch Ratings noted the company’s diversified business mix, leading market position, prudent liquidity management, and disciplined risk management.
Bank of America Corporation (NYSE:BAC)’s market position remains robust as it continues to leverage its vast network and diverse service offerings in a bid to maintain a competitive edge. Its capability to gain deposit market share as well as to benefit from a recovery in capital markets activity are being regarded as the key advantages. Also, Bank of America Corporation (NYSE:BAC) remains well-placed to capitalize on numerous growth opportunities. The expected recovery in capital markets activity can fuel its investment banking and trading revenues.
Diamond Hill Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Other top Q4 contributors included Bank of America Corporation (NYSE:BAC), Parker-Hannifin and Labcorp. Banking and financial services company Bank of America benefited from broadly improved sentiment around banks as the market anticipates lower regulatory pressures under the incoming presidential administration. Shares also received a sentiment boost from growing optimism for better loan growth in the period ahead.”
3. Berkshire Hathaway Inc. (NYSE:BRK-A)
Diamond Hill Capital’s Stake Value: $710.93 million
Number of Hedge Fund Holders: 131
Wall Street analysts Meyer Shields of KBW and Brian Meredith of UBS have increased their price targets on Berkshire Hathaway Inc. (NYSE:BRK-A)’s stock after it delivered strong Q4 2024 results. Meredith reiterated a “Buy” rating, increasing the price target to $836,135 from $803,444, while Shields boosted the target price to $775,000 from $750,000, maintaining a “Market Perform” rating. Berkshire Hathaway Inc. (NYSE:BRK-A) stated that its operating profit -encompassing earnings from its wholly owned businesses — increased to $14.5 billion during Q4 2024. That was aided by a strong increase in insurance underwriting.
While Berkshire Hathaway Inc. (NYSE:BRK-A)’s financial results were healthy, it was the company’s strong cash pile of $334.2 billion that turned heads on Wall Street. However, in the annual letter, Mr. Buffett said that he is struggling to find investments. The legendary investor comforted its shareholders by saying that Berkshire Hathaway Inc. (NYSE:BRK-A) will forever deploy a substantial majority of money in equities. That being said, a small but important exception to its U.S.-based focus is the growing investment in Japan. Morningstar believes that the company’s strong balance sheet and liquidity are some of its competitive advantages. Its insurance operations remain well overcapitalized, possessing increased levels of equity, fixed income, and cash relative to its reserves.
2. Abbott Laboratories (NYSE:ABT)
Diamond Hill Capital’s Stake Value: $741.04 million
Number of Hedge Fund Holders: 66
Abbott Laboratories (NYSE:ABT) is engaged in discovering, developing, manufacturing, and selling healthcare products worldwide. Barclays upped the company’s price objective to $158, maintaining an “Overweight” rating, after the management’s improved financial outlook and revised earnings estimates. The company expects FY 2025 adjusted operating margin to be between 23.5% – 24.0% of sales, which reflects an increase of 150 basis points at the midpoint compared to 2024. Abbott Laboratories (NYSE:ABT) expects FY 2025 adjusted diluted EPS of $5.05 to $5.25, demonstrating a double-digit growth at the midpoint.
During 2024, the company announced over 15 new growth opportunities coming from its highly productive R&D pipeline. These consist of the combination of new product approvals as well as new treatment indications. Also, the medical device market offers strong growth opportunities for Abbott Laboratories (NYSE:ABT). With the aging of the global population and chronic diseases becoming more prevalent, the demand for advanced medical devices is anticipated to increase. Abbott Laboratories (NYSE:ABT)’s focus on developing cutting-edge technologies places it well to capitalize on such trends. Notably, worldwide medical devices sale rose 13.7% YoY in Q4 2024 on a reported basis and 14.0% on an organic basis, including double-digit growth in both the US and internationally.
1. American International Group, Inc. (NYSE:AIG)
Diamond Hill Capital’s Stake Value: $1.02 billion
Number of Hedge Fund Holders: 48
American International Group, Inc. (NYSE:AIG) provides insurance products for commercial, institutional, and individual customers in North America and internationally. Keefe Bruyette upped the company’s price objective to $90 from $87, keeping an “Outperform” rating on the shares. The analyst believes that American International Group, Inc. (NYSE:AIG)’s continuing underwriting margin progress is expected to fuel outperformance over the upcoming 12 months. With a strong focus on disciplined capital management, sustained underwriting excellence, and expense management, the company remains on track to deliver 10% plus core operating return on equity for FY 2025.
American International Group, Inc. (NYSE:AIG) has strengthened its capital structure, improved its financial performance, and achieved a historic milestone with the deconsolidation of Corebridge Financial. The company closed 2024 with strong Q4 2024 results, generating strong growth throughout the businesses with outstanding underwriting profitability. Notably, for FY 2024, adjusted after-tax income per diluted share came in at $4.95, a 12% increase YoY, or 28% on a comparable basis. The underwriting income stood at ~$2 billion, marking another year of strong underwriting results. RBC Capital Markets also reiterated an “Outperform” rating on American International Group, Inc. (NYSE:AIG)’s stock with a price objective of $87, lauding its healthy share buyback strategy and promising position for 2025.
Aristotle Capital Management, LLC, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Established in 1919 and headquartered in New York, American International Group, Inc. (NYSE:AIG) is one of the largest global insurance companies. AIG provides a comprehensive range of property and casualty (P&C) insurance to businesses and individuals in over 190 countries and jurisdictions around the world. The company also has a ~48% stake in Corebridge Financial (Corebridge), AIG’s old Life & Retirement segment.
AIG’s government bailout following the 2008 global financial crisis left the company on a 10+ year journey to transform its business (including five CEOs) by streamlining operations and attempting to improve its image with the public and investor community. Since taking over the General Insurance business in 2017 and assuming the role of CEO in 2021, Peter Zaffino has restructured underwriting and increased levels of reinsurance to reduce risk and control volatility, implemented a new structure for its High Net Worth business, divested non-core divisions such as crop risk and personal travel, and separated its Life & Retirement segment into the independently publicly traded company Corebridge. Following these actions, AIG will be a purely General Insurance focused business, with roughly 75% of its premiums tied to commercial and 25% to personal policies. We believe with Mr. Zaffino’s emphasis on risk-adjusted returns, AIG has become a stronger, more focused organization…” (Click here to read the full text)
While we acknowledge the potential of AIG as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than AIG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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