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How Diamond Hill Shines Bright

The firm's proven philosophy has been consistently applied, and we expect it to continue to reward investors over a full market cycle.

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Linda Abu Mushrefova: We think Diamond Hill is a standout boutique that has consistently applied its intrinsic value philosophy across its strategies. Its equity offerings span the market-cap spectrum from small to large cap, and more recently, it has also expanded into global and international stock investing. However, its domestic-equity-focused funds still dominate its lineup. 

The team has consistently applied the same proven approach to relative value investing across the board. It buys companies when their market prices are lower than the estimate of their intrinsic business value and sells them when they reach that value. The firm’s centralized research group of roughly two dozen sector specialists model companies’ cash flows using a five-year time horizon. The analysts then dive into balance sheets and income statements to estimate cash flows, normalized earnings, and an appropriate growth rate. Stocks trading at a discount to the team’s estimates of intrinsic value are eligible for inclusion, and portfolio managers at Diamond Hill are long-term investors. Bottom-up research determines positioning.

Its measured approach has rewarded investors through strong stock-picking over the long haul. Diamond Hill’s disciplined process, rooted in deep, fundamental analysis, earns several of the firm’s strategies medalist ratings. Diamond Hill Large Cap, Diamond Hill Mid Cap, and Diamond Hill Small-Mid Cap, which is closed to new investors, earn a Morningstar Analyst Rating of Gold, while Diamond Hill Small Cap, which reopened to new investors in early 2019, earns a Silver, and Diamond Hill Long-Short earns a Bronze rating. Their proven philosophy has been consistently applied, and we expect it to continue to reward investors over a full market cycle.

Linda Abu Mushrefova does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.