Diamond Hill Small-Mid Cap Strategy Sells Alaska Air Group (ALK) at Compelling Valuation

Diamond Hill Capital, an investment management company, released its “Small-Mid Cap Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In Q2, the market surged uniformly for the rest of the quarter following a sharp decline in April due to President Trump’s “Liberation Day” tariffs announcement. The portfolio returned 5.60% (gross) and 5.37% (net) compared to an 8.59% return for the Russell 2500 Index. For more information on the fund’s top picks in 2025, please check its top five holdings.

In its second-quarter 2025 investor letter, Diamond Hill Small-Mid Cap Fund highlighted stocks such as Alaska Air Group, Inc. (NYSE:ALK). Alaska Air Group, Inc. (NYSE:ALK) is an airline operator. The one-month return of Alaska Air Group, Inc. (NYSE:ALK) was 9.03%, and its shares gained 64.07% of their value over the last 52 weeks. On August 15, 2025, Alaska Air Group, Inc. (NYSE:ALK) stock closed at $57.36 per share, with a market capitalization of $6.614 billion.

Diamond Hill Small-Mid Cap Fund  stated the following regarding Alaska Air Group, Inc. (NYSE:ALK) in its second quarter 2025 investor letter:

“Despite markets’ relatively sharp bounce following April’s downward volatility, we were able to initiate several new positions in the quarter at what we consider compelling valuations: Generac Holdings, Alaska Air Group, Inc. (NYSE:ALK), Knife River Corporation, Taseko Mines, Century Communities and FTI Consulting.

Shares of regional airline Alaska Air Group were pressured meaningfully in the quarter following the tariff announcements, which raised questions among investors about the overall macroeconomic outlook. This gave us an attractive opportunity to reestablish a position in a business we know well — and which we had recently exited after it reached our estimate of intrinsic value — at a compelling valuation.”

Jim Cramer on Alaska Air Group (ALK): “Well-Run, But Airlines? Wrong to Own Right Now!”

A commercial passenger jet in the sky, performing its daily flight duties.

Alaska Air Group, Inc. (NYSE:ALK) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 56 hedge fund portfolios held Alaska Air Group, Inc. (NYSE:ALK) at the end of the first quarter, which was 45 in the previous quarter. While we acknowledge the risk and potential of Alaska Air Group, Inc. (NYSE:ALK) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Alaska Air Group, Inc. (NYSE:ALK) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Alaska Air Group, Inc. (NYSE:ALK) and shared the list of cheap travel stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 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.