Diamond Hill Small Cap Strategy Bets on Deeply Discounted Alexandria Real Estate Equities (ARE). Here’s Why

Diamond Hill Capital, an investment management company, released its “Small Cap Strategy” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fourth quarter posted another period of favorable gains for equity markets, with the Russell 2000 Index returning 2.19%, roughly in line with the Russell 1000 Index’s 2.41% gain. Health care (+18.6%) emerged as the best-performing sector in the Russell 2000 Index. Heightened uncertainty and geopolitical risks contributed to a mixed market environment in 2025 and Q4, yet the Russell 2000 Index still posted a 12.81% gain for the year. Heading into 2026, the firm continues to focus on resilient businesses that can sustain earnings in a volatile landscape. The Strategy returned 4.88% (net of fees) in the quarter compared to the Russell 2000 Index’s 2.19% gain. Please review the Strategy’s top five holdings to gain insights into their key selections for 2025.

In its fourth-quarter 2025 investor letter, Diamond Hill Small Cap Strategy highlighted stocks like Alexandria Real Estate Equities, Inc. (NYSE:ARE). The strategy initiated a position in Alexandria Real Estate Equities, Inc. (NYSE:ARE), a life science REIT, during the quarter. On February 4, 2026, Alexandria Real Estate Equities, Inc. (NYSE:ARE) stock closed at $55.31 per share. Alexandria Real Estate Equities, Inc. (NYSE:ARE) delivered a 3.83% return in the past month, and its shares are down 42.76% over the past twelve months. Alexandria Real Estate Equities, Inc. (NYSE:ARE) has a market capitalization of $9.585 billion.

Diamond Hill Small Cap Strategy stated the following regarding Alexandria Real Estate Equities, Inc. (NYSE:ARE) in its fourth quarter 2025 investor letter:

“We initiated a position in Alexandria Real Estate Equities, Inc. (NYSE:ARE) — the largest owner of US life-sciences real estate with a concentration in major biotech research clusters — as the sector has been under pressure from higher interest rates, lower venture capital funding, regulatory pressure and overbuilding of new lab space. Additionally, the company is working through a large, poorly timed development and land pipeline resulting in a big reduction in earnings and a dividend cut. After several years of underperformance, the shares are now deeply discounted and reflect many of these challenges; however, the company still maintains a solid balance sheet, a long operating history and a well-located portfolio.”

In another article, we covered Alexandria Real Estate Equities, Inc. (NYSE:ARE) and shared ClearBridge Investments’ views on the company. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.