Diamond Hill Capital’s Top 10 Stock Picks

4. Bank of America Corporation (NYSE:BAC)

Value of Diamond Hill Capital’s 13F Position (9/30/2024): $676 million

Number of Hedge Fund Shareholders (9/30/2024): 102

Hedge fund ownership of Bank of America Corporation (NYSE:BAC) has risen by 20% over the past two quarters as money managers appear to have grown more comfortable with the investment firm’s asset allocation and risk profile. Warren Buffett remains the largest Bank of America shareholder in our hedge fund database despite cutting his stake by 23% to just under 798 million shares in Q3.

Buffett and other money managers like Bank of America Corporation (NYSE:BAC) for its vast economic moat, strong customer retention, and consistent profitability. A sharp rise in interest rates over the past three years certainly hasn’t hurt on the profitability front, as Bank of America’s net interest income has jumped by 30% to $55.7 billion over the trailing 12 month period ended September 30. That said, BofA’s diluted EPS has actually declined by 10% over the past year and could benefit from a boost to the economy that could be triggered by a drop in interest rates in 2025.

The ClearBridge Value Equity Strategy likes Bank of America Corporation (NYSE:BAC)’s prospects for growth as the fund discussed in its Q1 2024 investor letter:

“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”