My final pick is Diamond Hill Capital Management (NASDAQ:DHIL), a registered investment adviser based in Columbus, Ohio, with $10.6 billion under management.
The 13-year-old firm has an investment philosophy that focuses on identifying the intrinsic value of a stock, then purchasing those that are trading at a discount to intrinsic value or whose intrinsic value is expected to grow. Once a stock represents 7% of a portfolio, it’s sold and the process is repeated. At the end of March, $6 billion of its assets under management were invested in its eight proprietary funds, including two long-short products. Long-term, most of its funds have outperformed their various benchmarks.
What makes Diamond Hill so intriguing is that it uses special dividends almost exclusively (no regular dividend and small share repurchase program) to reward shareholders. In the past five years, its annualized total return was 5.9%, 368 basis points greater than its asset manager peers. That return includes $46 in special dividends.
While there’s no guarantee that it will continue to pay out these dividends; its consistent if not spectacular revenue growth makes it very likely.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.