A Wall Street Transcript Interview with Ric Dillon, CEO and Portfolio Manager for Diamond Hill Capital Management, Inc.: Long/Short Investing with a Long Term Hold and a Margin of Safety

Wall Street Transcript

67 WALL STREET, New York - June 10, 2014 - The Wall Street Transcript has just published its Investing Strategies Report. This special feature contains expert industry commentary through in-depth interviews with professional Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Secular Growth Themes - Small Cap Investing - All-Cap Investing - Bottom-Up Stock Selection - Quality of Business - Growth at a Reasonable Price - Long/Short Strategy - Investment Risk/Return

Companies include: EOG Resources, Inc. (EOG), Brunswick Corp. (BC), Willis Group Holdings Ltd. (WSH), Intuitive Surgical, Inc. (ISRG), Medtronic, Inc. (MDT), Pfizer Inc. (PFE), AstraZeneca plc (AZN), Staples, Inc. (SPLS), Amazon.com Inc. (AMZN), Office Depot, Inc. (ODP), Boeing Co. (BA), EMBRAER - Empresa Brasileira d (ERJ) and many others.

In the following excerpt from the Investing Strategies Report, a highly experienced portfolio manager discusses his methodology and top long and short picks for investors:

TWST: Please begin with an overview of the Diamond Hill Long/Short Fund.

Mr. Dillon: Our fund, which started as a long-only fund in the year 2000 and became long/short in the second half of 2002, is intended to be net long at all times in the range of 40% to 75%, generally. The long exposure can be up to 100%, and the short exposure can be up to 40%. We don't use borrowing, but we can have a total exposure greater than 100% when you add the long exposure and the short exposure together.

The one thing that probably differentiates this fund, and our firm also, is that we truly are very long-term-focused. As a result of that, you'll see that our turnover statistics are much lower. We think that long-term focus is an important distinction and advantage in the investment world.

TWST: Can you give us a closer look at the guiding investment principles that are important to your equity-selection process?

Mr. Dillon: In addition to our long-term focus that I just mentioned, we try to truly understand the economic drivers of the businesses that we're investing in. We think of them as businesses. We don't think of them as a piece of paper to trade, and that's very important.

We always want a margin of safety. When we're forecasting the future, and inevitably when you make those kinds of forecasts you'll have errors in your forecasts, that margin of safety is, we find, the biggest risk mitigator.

TWST: Can you share with us how your portfolio has evolved since early 2013 in terms of your sector weightings - long/short positions and cash position?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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