Investment Objective
The Portfolio seeks to provide long-term capital appreciation.
Investment Strategy
The Portfolio invests substantially all its assets in the Diamond Hill Small-Mid Cap Separate Account. The Diamond Hill Small-Mid Cap Separate Account, under normal market conditions, invests at least 80% of its net assets in U.S. equity securities with small and medium market capitalizations that Diamond Hill believes are undervalued. Equity securities consist of common and preferred stocks. Small and mid cap companies are defined as companies with market capitalizations at the time of purchase between $500 million and $10 billion or in the range of those market capitalizations of companies included in the Russell 2500 Index at the time of purchase. The capitalization range of the Russell 2500 Index is between $44.3 million and $31.4 billion as of January 31, 2021. The size of the companies included in the Russell 2500 Index will change with market conditions.
Diamond Hill focuses on estimating a company's value independent of its current stock price. To estimate a company's value, Diamond Hill concentrates on the fundamental economic drivers of the business. The primary focus is on "bottom-up" analysis, which takes into consideration earnings, revenue growth, operating margins and other economic factors. Diamond Hill also considers the level of industry competition, regulatory factors, the threat of technological obsolescence, and a variety of other industry factors. If Diamond Hill's estimate of a company's value differs sufficiently from the current market price, the company may be an attractive investment opportunity. In constructing a portfolio of securities, Diamond Hill is not constrained by the sector or industry weights in the benchmark. Diamond Hill relies on individual stock selection and discipline in the investment process to add value. The highest portfolio security weights are assigned to companies where Diamond Hill has the highest level of conviction.
Once a stock is selected, Diamond Hill continues to monitor the company's strategies, financial performance and competitive environment. Diamond Hill may sell a security as it reaches Diamond Hill's estimate of the company's value if it believes that the company's earnings, revenue growth, operating margin or other economic factors are deteriorating; or, if it identifies a stock that it believes offers a better investment opportunity.
Investment Risks
Management Risk, Market Risk, and Small Cap and Mid Cap Company Risk. These risks are discussed under Diamond Hill Investment Risks, per the disclosure booklet
