Wednesday, May 14, 2008

Investment Discipline

Buy Discipline

Diamond Hill Capital Management utilizes a two-step selection process to find attractive stocks regardless of overall market conditions. Too often, investors concentrate on either growth or value. Our belief is that neither is sufficient in isolation, but both are necessary for making investment decisions.

Fundamental Research

Our investment process begins with fundamental research. The objective is to find companies with solid growth prospects based on company-specific strategies or industry factors. We utilize our own resources and the research of respected Wall Street analysts in the quest to identify attractive companies. Corporate and financial histories, management philosophies, missions and forecasts are all scrutinized carefully prior to application of our buy discipline.

Proprietary Investment Model

Once a company has passed the rigorous procedure outlined above, our proprietary investment model is applied. Utilizing both current and estimated fundamental data, the model calculates an estimate of fair value and a five-year price target for each stock. This enables us to determine the stock’s relative attractiveness. Once a stock is selected, we continue to monitor the company’s strategies, financial performance and competitive environment.

Sell Discipline

Our sell discipline is to sell a stock when the price objective is attained, a company does not perform as expected, or we replace one stock with another based on relative attractiveness.

Back to Our Philosophy