Diamond Hill Mid Strategy Outperforms in Q4 With HII, WESCO and Ciena Among Key Drivers

Overview

• The Q4 2025 letter reports a 3.65% net return for Diamond Hill’s Mid Strategy versus 0.16% for the Russell Midcap Index, with 13.47% YTD versus the Index’s 10.60%.
• In its market backdrop, the firm says 2025 equity moves were powered by AI-related spending, followed by a December pause as investors grew more cautious about AI and valuations.
• Diamond Hill cites Huntington Ingalls as a leading contributor after strong Q3 results, raised full-year guidance, a new US Navy frigate contract, discussion of a potential new battleship concept, and easing labor challenges.
• WESCO is credited for Q4 outperformance after solid Q3 results and higher 2025 guidance, with organic growth helped by a data center business approaching 20% of revenue; Ciena also benefited from hyperscaler and AI-related demand and rising cloud spending tied to pluggables and data interconnect.
• The portfolio commentary notes positioning for heightened uncertainty given elevated valuations, and it flags a new position in Zoetis established after concerns over a canine arthritis drug pressured the share price below the team’s intrinsic value estimate.