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)