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Here's What This Big Value Investor Has Been Buying and Selling

By Selena Maranjian - Apr 21, 2013 at 6:45AM

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

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 $9.5 billion in value as of March 31.

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 Philip Morris International and Reinsurance Group of America. Other new holdings of interest include Radian Group (RDN -1.44%). To say that mortgage insurer Radian had a good past year would be an understatement, as the stock more than tripled. That's partly due to expectations of a boom in business as the housing market picks up, with tighter lending rules probably leading to greater need for the coverage. The stock recently got an upgrade, with an analyst expecting a possibly bumpy 2013 because of a high level of delinquent loans, but much smoother sailing in following years.

Among holdings in which Diamond Hill increased its stake were Liquidity Services (LQDT 2.54%) and Apple (AAPL 0.17%). Liquidity is a commercially focused online auctioneer and a Motley Fool Stock Advisor recommendation. It benefits from a relatively capital-light business model and solid profit margins, and it specializes in surplus, wholesale, and salvage assets. Some worry about slowing growth and competition and didn't like the company lowering expectations last quarter. But the stock jumped recently on a big revenue increase.

Apple is down more than 40% from its 52-week high, as many investors worry about slowing growth and fear a further stock slide. The stock seems cheap to many now, but some think it might be best to wait and see how the company fares in the coming months. It reports its latest quarterly results on Tuesday. Apple may enjoy strong growth from developing markets, and it's developing its own cheaper iPhone, too.

Diamond Hill reduced its stake in lots of companies, including Assured Guaranty (AGO -0.41%). The company offers a 2% dividend yield, which reflects a recent 11% increase, but it's been struggling lately. Its CEO recently said at a conference that the company is working on new business production but is feeling "pressured in the States." On the plus side, "We actually expect 2013 to be a reasonably good year in the international markets." Assured also won a legal case earlier this year and along with it many millions.

Finally, Diamond Hill's biggest closed positions included Johnson & Johnson and PPG Industries. Other closed positions of interest include Huntington Bancshares (HBAN -0.69%), which many view as a high-quality bank because of its low percentage of non-performing assets. It's also viewed favorably for its effective management and smart growth strategy. Its recently reported first quarter featured net income down a bit -- but also a 25% dividend increase.

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, and 13-F forms can be great places to find intriguing candidates for our portfolios.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$137.59 (0.17%) $0.24
Liquidity Services, Inc. Stock Quote
Liquidity Services, Inc.
LQDT
$13.35 (2.54%) $0.33
Huntington Bancshares Incorporated Stock Quote
Huntington Bancshares Incorporated
HBAN
$13.02 (-0.69%) $0.09
Radian Group Inc. Stock Quote
Radian Group Inc.
RDN
$20.61 (-1.44%) $0.30
Assured Guaranty Ltd. Stock Quote
Assured Guaranty Ltd.
AGO
$55.91 (-0.41%) $0.23

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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