We recently published a list of Diamond Hill Capital Stock Portfolio: Top 10 Stock Picks. In this article, we are going to take a look at where American International Group, Inc. (NYSE:AIG) stands against other top 10 stock picks of Diamond Hill Capital.
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).
A professional advisor helping a client with an insurance policy, highlighting the company’s attention to customer service.
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)
Overall, AIG ranks 1st on our list of top 10 stock picks of Diamond Hill Capital. 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.
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Disclosure: None. This article is originally published at Insider Monkey.