Here's What This $11 Billion Value Investor Has Been Buying

It can pay off to keep an eye on the big guys.

Feb 6, 2014 at 5:15PM

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 $11 billion in value as of Dec. 31, 2013.

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

The biggest new holdings are Franklin Resources and Marsh & McLennan Companies, Inc. Other new holdings of interest include Groupon (NASDAQ:GRPN). Groupon has struggled in recent years, but it roared back in 2013, gaining 142% as it boosted business (albeit with slimmer profit margins) by starting to sell merchandise, among other moves. With its travel division doing well, it has been suggested that might do well to buy Groupon.

Among holdings in which Diamond Hill Capital Management increased its stake was Teva Pharmaceutical Industries (NYSE:TEVA). Teva's oral multiple sclerosis drug laquinimod received a negative opinion from Europe's regulators recently. Some have been worried about the impending patent-protection expiration of its multiple sclerosis drug, Copaxone, but the effect of that will be dulled by an FDA approval of a higher dose Copaxone formulation. Bulls focus on the fact that Teva Pharmaceutical Industries is still a major player in generic drugs, with more than 140 product registrations awaiting FDA approval. Teva Pharmaceuticals recently bought NuPathe and its FDA-approved patch for migraines. Its stock yields 2.5%.

Diamond Hill Capital Management reduced its stake in lots of companies, including Baidu (NASDAQ:BIDU) and KeyCorp (NYSE:KEY). China-based search-engine giant Baidu has gained some 77% in 2013, and plenty of bulls expect further growth. Last month, JPMorgan Chase analyst Alex Yao boosted his price target for Baidu to $210 -- the stock has recently been near $150 per share. Yao likes Baidu's prospects in the mobile arena. Baidu's last quarter featured revenue up 42%, but profit margins shrinking a bit due in part to investments in video, smart TVs, security software, group buying (a la Groupon), and more.

KeyCorp, a bank, has seen its stock rise by about 34% over the past year. Its fourth quarter was mixed, with earnings up 21% over year-ago levels and revenue roughly flat. In a conference call, management pointed out three areas the company has been focusing on -- optimizing and growing revenue, improving efficiency, and effectively managing capital -- and said, "We made meaningful progress in each of these areas." Late last year, my colleague Dave Koppenheffer viewed KeyCorp as on its way to becoming a "wonderful company." KeyCorp's dividend yields 1.7% and was hiked by 10% last year.

Finally, Diamond Hill's biggest closed positions included Nike and Charles Schwab Corporation. Other closed positions of interest include Hartford Financial Services Group (NYSE:HIG). Hartford has been shifting its focus from annuities, retirement planning, and life insurance toward property and casualty insurance, while it also works to reduce its significant debt. Following a strong third quarter, Hartford Financial Services Group's fourth quarter featured core earnings up 78% and management citing "improved financial flexibility and growing dividend capacity from our operating subsidiaries." (Its dividend was hiked by 50% last year and recently yielded 1.9%.)

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.

The No. 1 Way to Lose Your Wealth Without Even Knowing It
You’ve fought hard to build wealth for you and your family. Yet one all-too-common pitfall could completely derail your dreams before you even know it. That's why a company The Economist hails as "an ethical oasis" has isolated five simple questions you must answer to ensure that your financial future is really secure.

Can you answer YES to all five of these eye-opening questions?
Click here to find out -- before it’s too late!

Selena Maranjian, whom you can follow on Twitter, owns shares of Baidu and The Motley Fool recommends Baidu, Nike,, and Teva Pharmaceutical Industries. It owns shares of Baidu, KeyCorp, Nike, and Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information