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Why We Upgraded This Mid-Cap Value Fund to Gold

Why We Upgraded This Mid-Cap Value Fund to Gold
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Diamond Hill Mid Cap I

Linda Abu Mushrefova: For investors seeking mid-cap value exposure, Diamond Hill Mid Cap is an excellent option. The fund was recently given a Morningstar Analyst Rating of Gold.

Chris Welch has been the lead manager on this strategy since its December 2013 inception and has been at Diamond Hill since 2005. He is supported by assistant managers Chris Bingaman and Jenny Hubbard as well as Diamond Hill's centralized research team of approximately two dozen sector analysts. The analyst team supports all of Diamond Hill's equity offerings and have proven their stock-picking abilities over time. For example, Diamond Hill Small-Mid Cap, which is also managed by Welch, has about 80% overlap with this strategy and a longer track record. Over a full market cycle, it tops its peers and index because of successful stock-picking.

The approach adopted here drives all of Diamond Hill's equity strategies. The team conducts deep analysis to identify attractive companies trading at a discount to their estimated intrinsic value. Analysts are responsible for modeling cash flows on a five-year time horizon, which includes looking at each name's balance sheet and income statement to estimate cash flows, normalized earnings, and an appropriate growth rate. Welch then decides which names to invest in and oversees portfolio construction. The team's thoughtful approach has rewarded investors in similar strategies, and we have confidence in their ability to deliver similarly attractive results over a full market cycle in this offering.

Finally, this fund is priced attractively relative to peers. Overall, its disciplined process, proven team, and attractive price tag contribute to our confidence in this fund's ability to reward investors over the long term.

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About the Author

Linda Abu Mushrefova

Senior Product Manager, ETF's
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Linda Abu Mushrefova, CFA, is a manager research analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She covers equity strategies.

Before rejoining Morningstar in 2017, Mushrefova was an analyst on the fixed-income team at Neuberger Berman, covering opportunistic strategies. From 2013-16, she held a variety of roles at Morningstar, including as a product consultant and a data analyst for the firm's open-end and hedge fund databases.

Mushrefova holds a bachelor's degree in economics from Northwestern University. She also holds the Chartered Financial Analyst® designation.

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