Diamond Hill Capital, an investment management company, released its “Large Cap Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. After a significant decline in April following President Trump’s “Liberation Day” tariffs announcement, markets recovered and increased consistently for the remainder of the quarter. The strategy modestly trailed the Russell 1000 Value Index in the second quarter and returned 2.87% (net) vs 3.79% for the index. The financial and consumer discretionary holdings lagged, while healthcare and communication services outperformed, boosting overall performance. To get an idea of the fund’s best choices for 2025, check out its top 5 positions.
In its second-quarter 2025 investor letter, Diamond Hill Large Cap Fund highlighted stocks such as Adobe Inc. (NASDAQ:ADBE). Adobe Inc. (NASDAQ:ADBE) is a technology company that operates through Digital Media, Digital Experience, and Publishing and Advertising. The one-month return of Adobe Inc. (NASDAQ:ADBE) was -6.90%, and its shares lost 36.93% of their value over the last 52 weeks. On August 7, 2025, Adobe Inc. (NASDAQ:ADBE) stock closed at $338.27 per share, with a market capitalization of $143.49 billion.
Diamond Hill Large Cap Fund stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its second quarter 2025 investor letter:
“Despite the markets’ relatively sharp bounce following April’s downward volatility, we were able to initiate a new position in Adobe Inc. (NASDAQ:ADBE) at what we consider a compelling valuation.
Adobe is the largest provider of creative content software by a wide margin, offering a robust suite of tools used by design professionals across various verticals, including graphic designers, video editors, and web and mobile app creators. The company also has strong positions in marketing and direct customer engagement software and owns the near-ubiquitous Adobe Acrobat platform. Although investors have seemingly weighed the potential for greater competition and AI disruption in the period ahead, we believe the current valuation largely reflects these concerns, particularly given the breadth and diversification of Adobe’s solutions, its incumbency and strong market positioning and its ongoing willingness to innovate. For example, over the last few years, it has infused more AI into its existing products. Consequently, we believe Adobe can deliver solid fundamentals over the next several years. So, we capitalized on what we consider an attractive discount relative to our estimate of intrinsic value to initiate a position in Q2.”
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Adobe Inc. (NASDAQ:ADBE) is in 13th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 111 hedge fund portfolios held Adobe Inc. (NASDAQ:ADBE) at the end of the first quarter, compared to 117 in the fourth quarter. In the fiscal second quarter of 2025, Adobe Inc. (NASDAQ:ADBE) reported revenue of $5.87 billion, representing 11% year-over-year growth. While we acknowledge the risk and potential of Adobe Inc. (NASDAQ:ADBE) 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 Adobe Inc. (NASDAQ:ADBE) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Adobe Inc. (NASDAQ:ADBE) and shared the list of best Stocks to invest in for high returns. ClearBridge Large Cap Growth Strategy exited Adobe Inc. (NASDAQ:ADBE) during Q2 2025 due to concerns over product saturation and rising competitive risks. 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.
