Diamond Hill Capital Makes New Tech Bets, Sells Charles Schwab

Diamond Hill Capital (Trades, Portfolio) recently disclosed its 13F portfolio updates for the fourth quarter of 2021, which ended on Dec. 31.
Diamond Hill Capital (Trades, Portfolio) was founded in 2000 and has its headquarters in Columbus, Ohio. It identifies itself as an independent investment management firm with a long-term focus based on fundamental, ground-up analysis of a company’s intrinsic value, as determined by factors such as market position, competition, management, valuation and growth prospects. The funds focus on buying undervalued companies that have a solid and proven foundation for revenue production.

Based on its latest filing, the firm’s top buys for the quarter were Becton, Dickinson and Co. (

BDX, Financial) and SS&C Technologies Holdings Inc. (SSNC, Financial), while its biggest sells were Charles Schwab Corp. (SCHW, Financial) and Gilead Sciences Inc. (GILD, Financial).

Becton, Dickinson

The firm established a new stake in Becton, Dickinson (

BDX, Financial) worth 1,571,292 shares, giving it a 1.41% weight in the equity portfolio. During the quarter, shares changed hands for an average price of $245.62.

Beckton, Dickinson is a medical technology company based in New Jersey. One of the largest companies of its kind, it manufactures and sells medical devices, instrument systems and reagents and also provides consulting and analytics services in related fields.

On Feb. 8, shares traded around $276.49 for a market cap of $78.74 billion. The GF Value Line rates the stock as fairly valued.

The company has a financial strength rating of 4 out of 10. Although the cash-debt ratio is low at 0.11, the Piotroski F-Score of 6 out of 9 indicates financial stability. Its profitability rating is 8 out of 10; the return on invested capital typically surpasses the weighted average cost of capital, indicating the company is creating value as it grows.

SS&C Technologies Holdings

The firm also took a 3,377,957-share stake in SS&C Technologies Holdings (

SSNC, Financial), giving the stock a 0.99% weight in the equity portfolio at an average price of $77.19 per share in the three months through the end of December.

SS&C Technologies is a multinational financial technology company based in Winsor, Connecticut. It provides cloud-based fintech solutions for the financial services and health care industries and serves as the world’s largest hedge fund and private equity administrator.

On Feb. 8, shares of SS&C Technologies traded around $80.73 for a market cap of $20.53 billion. The GF Value Line rates the stock as modestly overvalued.

The company has a financial strength rating of 4 out of 10. The current ratio of 1.06 and Altman Z-Score of 1.82 show the company could face liquidity issues. Its profitability rating is 9 out of 10, driven by a three-year revenue per share growth rate of 30.3% and a three-year Ebitda per share growth rate of 30.3%.

Charles Schwab

The firm sold out of its 5,124,619-share Charles Schwab (

SCHW, Financial) investment, which used to take up 1.42% of the equity portfolio. Shares traded for an average price of $81.09 during the quarter.

Based in San Francisco, Charles Schwab is a financial services company that offers a wide range of products, from mutual funds and bonds to stocks, options and futures. The popular online broker has more than 12 million in client accounts and $3.85 trillion in assets under management.

On Feb. 8, shares of Charles Schwab traded around $94.96 for a market cap of $179.53 billion. The GF Value line rates the stock as significantly overvalued.

The company has a financial strength rating of 3 out of 10; the equity-to-asset ratio of 0.1 is lower than 88% of industry peers, while the debt-to-equity ratio of 0.39 is below 55% of industry peers. Its profitability rating is 6 out of 10. The return on equity is slightly above average at 10.39%, though the return on assets is 1.08%, well below the industry median of 2.2%.

Gilead Sciences

The firm also sold all 2,728,609 of its Gilead Sciences Inc. (

GILD, Financial) shares. The position used to account for 0.72% of the equity portfolio. During the quarter, shares averaged a price of $68.95.

Headquartered in Foster City, California, Gilead Sciences is a biopharmaceutical giant that develops, manufactures and commercializes innovative drugs in a variety of health care fields with a focus on HIV/AIDS, liver diseases, hematology, oncology, respiratory diseases and cardiovascular conditions.

On Feb. 8, shares of Gilead Sciences traded around $63.70 for a market cap of $79.88 billion. The GF Value Line rates the stock as modestly undervalued.

The company has a financial strength rating of 5 out of 10. The interest coverage ratio of 10.08 and Piotroski F-Score of 6 out of 9 show a stable financial situation. Its profitability rating is 8 out of 10, with operating and net margins outperforming 90% of industry peers.

Portfolio overview

Based on its latest 13F report,

Diamond Hill Capital (Trades, Portfolio) held shares of 168 stocks in an equity portfolio valued at $27.98 billion at the end of December. The turnover rate for the quarter was 5%.

The top portfolio holding was American International Group Inc. (

AIG, Financial) with 3.92% of the equity portfolio, followed by Abbott Laboratories (ABT, Financial) with 3.04% and Berkshire Hathaway Inc. Class B shares (BRK.B, Financial) with 2.76%.

Looking at which sectors the firm was most invested in, it allocated the highest portfolio weights to stocks in the financial services, consumer cyclical and health care sectors.