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Here's What This $10 Billion Value Investor Has Been Buying

Every quarter, many money managers have to disclose what they've bought and sold via 13F filings. Their latest moves can shine a bright light on smart stock picks.

Today let's look at Diamond Hill Capital Management, founded in 2000 and based in Ohio. Its management has explained, "Our research is predominantly a bottom-up process beginning with fundamental analysis of a company's profitability and market position, financial and competitive position, management quality, valuation, and growth components of valuation." Like other value-oriented investors respected by The Motley Fool, Diamond Hill seeks undervalued investments and margins of safety.

The company's reportable stock portfolio totaled $9.9 billion in value as of Sept. 30, 2013.

Interesting developments
What does Diamond Hill's latest quarterly 13F filing tell us? Here are a few interesting details.

The biggest new holdings are DST Systems and Infinity Property & Casualty. Other new holdings of interest include BB&T and US Bancorp. BB&T is a sizable Southeastern regional bank that has posting solid numbers in recent financial reports. Its latest quarter featured rising earnings and improved credit quality. BB&T stock yields 2.6%. US Bancorp is looking to profit from mobile banking, charging fees for check deposits and developing voice-recognition capabilities in its apps in order to increase convenience. It also posted solid earnings recently and yields 2.4%.

Diamond Hill Capital Management reduced its stake in lots of companies, including Devon Energy and AAR. Among holdings in which it increased its stake were Philip Morris International (NYSE: PM  ) , First Niagara Financial Group (NASDAQ: FNFG  ) , and Teva Pharmaceutical Industries (NYSE: TEVA  ) .

Philip Morris, the international counterpart to domestic tobacco giant Altria, yields 4.2%. Philip Morris' third quarter featured estimate-topping earnings but also disappointing revenue and lowered projections. It has countered shrinking cigarette volume by raising prices and is enjoying rising smoking rates in some regions such as Asia. Nations with strong growth in smoking include Indonesia, Pakistan, China, Philippines, Mexico, and Korea, per Zacks research. Bulls like Philip Morris' innovation and share buybacks and consider it attractively priced.

First Niagara Financial Group, yielding 2.9%, is trading near a 52-week high. It has more than tripled its asset base since the financial crisis, though it significantly increased its share count to do so. Meanwhile, First Niagara Financial has been managing its credit risk well, which is kind of important for a banking enterprise. And when interest rates rise, as they should eventually do, First Niagara will benefit. It's poised for a solid turnaround.

Teva Pharmaceutical Industries, yielding 2.6%, has fallen out of favor with many investors, in part due to the impending loss of patent protection for its multiple-sclerosis drug, Copaxone. Bulls would remind you, though, that it's still a major player in generic drugs and can make up for their slimmer profit margins through volume. It recently had 147 product registrations awaiting FDA approval.

Finally, Diamond Hill's biggest closed positions included and Selective Insurance Group. Other closed positions of interest include Huntington Bancshares (NASDAQ: HBAN  ) and Diamond Foods (UNKNOWN: DMND.DL  ) . Huntington Bancshares is viewed by many as a high-quality bank due to its low percentage of nonperforming assets. It's also viewed favorably for its effective management and smart growth strategy. Its recently reported quarter featured flat revenue but rising earnings and reduced costs -- and a shifting business mix, including more auto loans. Huntington Bancshares yields 2.2%.

Diamond Foods' stock is up about 29% over the past year, and that includes a sharp drop after it posted fourth-quarter results that included lackluster guidance. Diamond has suffered from accounting-related troubles, and its revenue growth has slowed. Its future might be bright, but it makes sense to consider a wait-and-see approach with this company.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13F forms can be great places to find intriguing candidates for our portfolios.

Look beyond big money-managers for ultimate growth
While it can be effective to find solid investing ideas in the moves of big money managers, they won't all be fast growers. If you're seeking some stocks with great growth prospects, Motley Fool co-founder David Gardner, founder of the No. 1, best-performing growth stock newsletter in the world, has developed a unique strategy for uncovering truly wealth-changing stock picks. Learn about it, and a few of his favorite growth stock superstars, in a special free report called "6 Picks for Ultimate Growth."

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Related Tickers

12/31/1969 7:00 PM
DMND.DL $0.00 Down +0.00 +0.00%
Diamond Foods CAPS Rating: **
FNFG $10.18 Down +0.00 +0.00%
First Niagara Fina… CAPS Rating: *****
HBAN $9.64 Up +0.03 +0.26%
Huntington Bancsha… CAPS Rating: *****
PM $99.08 Down -0.06 -0.06%
Philip Morris Inte… CAPS Rating: ****
TEVA $50.48 Up +0.21 +0.42%
Teva Pharmaceutica… CAPS Rating: ****