Diamond Hill Capital, an investment management company, released its “Small Cap Fund” fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. In Q4, markets rose unevenly, ending another positive year for markets. Stocks rose generally after the US election, but several lost most or all of their gains before the end of the year. Against this backdrop, the strategy outperformed the Russell 2000 Index in Q4 and for the full year. Relative strength in Q4 was concentrated among industrials holdings outperforming benchmark peers by a wide margin. Additionally, consumer staples and energy holdings also provided relative tailwinds. On the other hand, consumer discretionary holdings were the main cause of strategy’s relative weakness. Even though holdings were quite favorable on an absolute basis, underweight to the technology sector was another headwind in Q4. The strategy returned 0.93% in Q4 and 13.22% in 2024, compared to 0.33% and 11.54% return for Russell 2000 Index for the same periods. For more information on the fund’s top picks in 2024, please check its top five holdings.

In its fourth quarter 2024 investor letter, Diamond Hill Small Cap Fund emphasized stocks such as Ashland Inc. (NYSE:ASH). Ashland Inc. (NYSE:ASH) is a nuclear fuel components and services provider for the nuclear power industry. One-month return of Ashland Inc. (NYSE:ASH) was -9.44%, and its shares lost 30.91% of their value over the last 52 weeks. On February 12, 2025, Ashland Inc. (NYSE:ASH) stock closed at $64.07 per share with a market capitalization of $3.023 billion.

Diamond Hill Small Cap Fund stated the following regarding Ashland Inc. (NYSE:ASH) in its Q4 2024 investor letter:

Among our bottom Q4 contributors were Red Rock Resorts and Ashland. Specialty chemical manufacturer Ashland is facing competitive pressures in a few product lines as well as soft demand in China. Further, the company is undergoing a restructuring, which has pressured near-term results. Given we believe the negative impacts from destocking should largely be behind the company, we are in the process of evaluating the outlook from here and are prepared to act accordingly should we determine our fundamental thesis has been impaired.

A chemist in a laboratory mixing specialty chemicals and materials for research.

Ashland Inc. (NYSE:ASH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held Ashland Inc. (NYSE:ASH) at the end of the third quarter which was 25 in the previous quarter. Ashland Inc.'s (NYSE:ASH) fiscal first quarter sales decreased 14% from the prior year's quarter to $405 million. While we acknowledge the potential of Ashland Inc. (NYSE:ASH) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article we discussed Ashland Inc. (NYSE:ASH) and shared the list of long-term stock picks of billionaire Lee Cooperman. Diamond Hill Small Cap Fund detracted from Diamond Hill Small Cap Fund's performance in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.