Diamond Hill Capital (Trades, Portfolio), part of Columbus-based Diamond Hill Investment Group (DHIL, Financial), disclosed in a regulatory portfolio update filing that its top five trades during the fourth quarter of 2022 included a new position in CarMax Inc. (KMX, Financial), boosts to its holdings of First Republic Bank (FRC, Financial) and Chevron Corp. (CVX, Financial) and reductions to its investments in VF Corp. (VFC, Financial) and SVB Financial Corp. (SIVB, Financial).
The firm invests using both bottom-up and top-down analysis. Fundamental analysis considers companies’ profitability, market position and management quality. Likewise, top-down analysis considers industry dynamics and sector economic factors.
As of December 2022, the firm’s $22.01 billion 13F equity portfolio contains 169 stocks, with three new positions and a quarterly turnover ratio of 5%. The top four sectors in terms of weight include financial services, industrials, health care and consumer cyclical, representing 25.14%, 15.16%, 13.30% and 13.14% of the equity portfolio.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
CarMax
Diamond Hill invested in 5,386,178 shares of CarMax (KMX, Financial), giving the stake 1.49% equity portfolio weight. Shares averaged $64.20 during the fourth quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.48 as of Wednesday.
The Richmond, Virginia-based car retail company has a GF Score of 85 out of 100 based on a growth rank of 10 out of 10, a profitability rank of 8 out of 10, a momentum rank of 5 out of 10 and a rank of 4 out of 10 for financial strength and GF Value.
CarMax’s profitability ranks 8 out of 10, driven by a five-star business predictability rank despite profit margins underperforming more than 70% of global competitors.
Other gurus with holdings in CarMax include Chuck Akre (Trades, Portfolio)’s Akre Capital Management and Ruane Cunniff (Trades, Portfolio).
First Republic Bank
The firm added 1,494,508 shares of First Republic Bank (FRC, Financial), expanding the position by 236.19% and its equity portfolio by 0.83%.
Shares of First Republic Bank averaged $122.04 during the fourth quarter; the stock is modestly undervalued based on its price-to-GF Value ratio of 0.71 as of Wednesday.
The San Francisco-based bank has a GF Score of 84 out of 100 based on a GF Value rank of 10 out of 10, a growth rank of 9 out of 10, a profitability rank of 7 out of 10, a momentum rank of 5 out of 10 and a financial strength rank of 3 out of 10.
First Republic Bank’s profitability ranks 7 out of 10 on the back of a five-star business predictability rank despite net margins and returns outperforming just over 55% of global competitors.
Chevron
Diamond Hill added 918,553 shares of Chevron (CVX, Financial), expanding the holding by 430.59% and its equity portfolio by 0.75%.
Shares of Chevron averaged $174.51 during the fourth quarter; the stock is modestly undervalued based on its price-to-GF Value ratio of 0.87 as of Wednesday.
The San Ramon, California-based oil and gas company has a GF Score of 87 out of 100 based on a financial strength rank of 9 out of 10, a growth rank of 8 out of 10, a momentum rank of 6 out of 10 and a rank of 7 out of 10 for profitability and GF Value.
Chevron’s financial strength ranks 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 9 out of 9 and an interest coverage ratio that outperforms approximately 80% of global competitors.
Other gurus with holdings in Chevron include Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) and Ken Fisher (Trades, Portfolio)’s Fisher Investments.
VF Corp.
The firm sold 6,682,042 shares of VF Corp. (VFC, Financial), slicing 96.95% of the position and 0.96% of its equity portfolio. Shares averaged $29.39 during the fourth quarter.
GuruFocus’ GF Value Line labeled the Denver-based sportswear company a possible value trap based on the company’s low price-to-GF Value ratio of 0.34 as of Wednesday and a poor rank of 4 out of 10 for financial strength and momentum.
VF’s low financial strength rank stems from several warning signs, which include a weak Altman Z-score of 1.68 and a debt-to-equity ratio that underperforms more than 90% of global competitors.
The company has a GF Score of 62 out of 100, driven by a profitability rank of 7 out of 10. However, the company does not have enough data to compute a growth rank and thus, the GF Score may give an incomplete picture of its potential.
SVB Financial
The firm sold 570,021 shares of SVB Financial (SIVB, Financial), trimming 59.59% of its position and 0.92% of its equity portfolio. Shares averaged $248.39 during the fourth quarter.
GuruFocus’ GF Value Line labeled the Santa Clara, California-based loan service company a possible value trap based on the company’s low price-to-GF Value ratio of 0.66 as of Wednesday, poor financial strength rank of 3 out of 10 and weak momentum rank of 2 out of 10.
Despite the low momentum and financial strength ranks, SVB Financial has a GF Score of 76 out of 100, driven by a growth rank of 9 out of 10, a GF Value rank of 8 out of 10 and a profitability rank of 6 out of 10.
