Interview With The Portfolio Manager And CEO: Diamond Hill Capital Management, Inc. (DHIL) - Ric Dillon

Wall Street Transcript

67 WALL STREET, New York - May 2, 2012 - The Wall Street Transcript has just published its U.S. Banking Report: An Investor's Guide offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Money Center Bank Balance Sheets - Dodd-Frank Act, Volcker Rule and Durbin Amendment - Cost Reduction and Consolidation Activity - Macroeconomic Cyclical Recovery

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Ric Dillon, CFA, serves as Portfolio Manager and Chief Executive Officer for Diamond Hill Capital Management, Inc. From 1997 to 2000, he served as Portfolio Manager at Loomis Sayles & Co., an investment advisory firm. From 1993 to 1997, Mr. Dillon served as the President and Chief Investment Officer of Dillon Capital Management, an investment advisory firm. He has a B.S. in finance, an M.A. from The Ohio State University and an MBA from the University of Dayton.

TWST: Please begin with a brief introduction to Diamond Hill, including some highlights from its history and an overview of your current operations.

Mr. Dillon: The company got started as Diamond Hill Investment Group in May of 2000. I was hired by a public company by the name of The Banc Stock Group based in Columbus, Ohio. They had gone public in 1993 and their independent board of directors decided to make a change in direction. So I was hired to do two things - to rationalize the existing business, which was a niche broker/dealer dealing with community bank stocks, and to build a money management business, which has been my career. And we embarked on that, as I mentioned, in May of 2000. We concluded early on that the niche broker/dealer really didn't fit into either what we were trying to do on the money management side or as a standalone business, so we made the decision to close it. And fortunately, we were able to transition most of the people to other firms over the course of the first two years. So we completed that essentially at the end of 2002.

TWST: Please tell us about the firm's client base and its total assets under management.

Mr. Dillon: Our family of mutual funds, the Diamond Hill Funds, is approximately $4 billion. Separate accounts, institutional, subadvisory would be another $5 billion.

TWST: Please tell us more about your professional background, as well as the strengths you believe you have among the members of Diamond Hill's core management team.

Mr. Dillon: Well, I started in 1977, right out of school, and I worked for Ohio Public Employees Retirement System in their investment department. I went on to work at a bank in Dayton, Ohio. I started up a small money management firm in Dayton, Ohio, and then on to the Detroit office of Loomis, Sayles in 1986. And then in 1993, I started a firm in Columbus, Ohio, that in 1997 was acquired by Loomis, Sayles. And so I was back with them for another three years. And at end of my employment agreement with Loomis, Sayles, I came back to Columbus, Ohio and joined The Banc Stock Group.The people that I mentioned are all on the portfolio management side and still with the firm. And while we all share the same investment philosophy, we have varying experiences and strengths. Chuck Bath, who like me, has been in the business a long time, has a lot of strength as an investor. He had a great track record during his career at Nationwide Insurance running their flagship fund. And so he and I sort of serve as the senior investment team members. But the next generation, if you will, are people like Bill Dierker and Chris Welch who worked with Chuck at Nationwide. Chris Bingaman and Tom Schindler, they both worked with me at my firm. And then actually when my firm was acquired, they went to work with Chuck and the other fellows. So I think the strengths beyond the individual strengths they each have comes from the fact that we, by sharing the same philosophy, it allows a great deal of productive communication and collaboration on all of our strategies.

TWST: How would you describe the overarching investment philosophy that guides all of the firm's different product offerings?

Mr. Dillon: Yes, and it's, of course, something that is our version of what Benjamin Graham thought, so we didn't invent this philosophy. In fact, when both Chuck and I started our careers, it was somewhat of a normative philosophy back in those days. And really over the course of the 1980s and 1990s, I think newer philosophies came into existence for a host of reasons, but the philosophy that I'm alluding to, which is a philosophy that's very valuation sensitive and very long term in its nature, that philosophy became probably a minority philosophy by the turn of the century. And in fact, it's not a coincidence simply, but perhaps somewhat causative that it did fall so deeply out of favor, and so few people employed it, but that fact allowed what took place or what culminated in the market in 2000, which as you'd recall, was the peak in the market that still is considerably above where current market levels are 12 years later.

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