Diamond Hill Int’l Strategy Q4 2025 Review

Quarterly Snapshot

In the fourth quarter of 2025, the Diamond Hill International Strategy achieved a return of 3.87 percent, calculated net of all fees. During the same period, the benchmark MSCI ACWI ex USA Index posted a stronger gain of 5.05 percent. This performance gap highlights the challenges faced by the portfolio amid fluctuating market conditions.

Performance Overview

The strategy’s results reflect a nuanced interplay of sector allocations and individual stock choices. While the overall return lagged slightly behind the benchmark, certain areas provided notable contributions that helped mitigate broader underperformance.

Key Drivers of Performance

Several factors influenced the relative outcomes for the quarter. Notably, stock selection decisions within the health care and financial sectors acted as detractors, pulling returns below those of the index. These areas experienced headwinds that impacted specific holdings more severely than the broader market representation.

On a more positive note, astute stock picks in the information technology and industrials sectors delivered meaningful boosts to performance. These gains were complemented by the strategy’s overweight positioning in communication services, which benefited from favorable sector dynamics and helped offset some of the losses elsewhere.

Summary of Returns

• The Diamond Hill International Strategy delivered 3.87% net of fees.
• The MSCI ACWI ex USA Index advanced by 5.05%.
• Challenges in health care and financials stock selection weighed on relative results.
• Strengths in information technology and industrials selections provided uplift.
• Overweight in communication services further supported performance.

Analysis of Underperformance

The modest underperformance relative to the MSCI ACWI ex USA Index stemmed primarily from suboptimal stock selections in the health care and financial sectors. These disappointments counterbalanced the positive contributions from other areas, including technology and industrials. The overweight stance in communication services played a supportive role, capturing additional value during a period of sector strength.

Portfolio Positioning for Future Growth

Looking ahead, the portfolio maintains strategic positions designed to harness emerging opportunities in high-growth areas. For instance, investments in key semiconductor players such as Samsung Electronics and SK hynix are well-aligned with surging demand for high-bandwidth memory and artificial intelligence applications. Current market valuations for these holdings appear to undervalue the potential for a lasting transition toward more premium, higher-margin products in their lineups.

New Investment Additions

The strategy introduced fresh positions that underscore a disciplined approach to value-oriented opportunities. NatWest Group stands out as a compelling addition, trading at levels that management views as undervalued following extensive restructuring efforts. The bank demonstrates robust prospects for capital returns to shareholders, bolstered by improved operational efficiency and a solid balance sheet.

Similarly, Theon International has been incorporated into the portfolio due to its advantageous positioning amid rising European defense expenditures. The company operates in a niche with strong tailwinds from geopolitical developments and increased government spending. Its current share price trades at a meaningful discount to estimates of intrinsic value, presenting an attractive risk-reward profile for long-term investors.

Strategic Outlook

Overall, the fourth quarter results for the Diamond Hill International Strategy encapsulate a period of selective navigation through diverse international markets. While certain sectors presented hurdles, the emphasis on undervalued opportunities in technology, industrials, and communication services helped preserve capital and position the portfolio for prospective upside. The recent additions of NatWest Group and Theon International exemplify the team’s commitment to identifying high-conviction ideas where market prices diverge from fundamental worth.

Moving into 2026, the strategy remains focused on intrinsic value investing principles, targeting companies with durable competitive advantages trading below their conservatively estimated worth. This approach, combined with active management of sector exposures, aims to deliver superior risk-adjusted returns over full market cycles.