Chris Welch, Portfolio Manager for Diamond Hill Capital, Sees Intrinsic Value as Key to Investment Returns

November 8, 2017

Chris Welch, is the Co-Chief Investment Officer and Portfolio Manager at Diamond Hill Capital Management, Inc.  Diamond Hill was founded in 2000, and it’s grown to over $21 billion in assets under management in both equities and fixed income. All of the Diamond Hill portfolio strategies are based on a long-term intrinsic value investment philosophy.

Mr. Welch details the intrinsic value investment process in this exclusive interview with the Wall Street Transcript:  “…we estimate the intrinsic value of companies based on the future cash flows that they generate and adjusting those cash flows for the risk involved in producing them. We always take a long-term time horizon when we do that. We always model companies over a five-year time horizon. We apply a terminal valuation and then we discount back at an appropriate rate. And our estimates are based on the independent research of our analyst team.”

Mr. Welch gives many examples in his interview, one of his favorites being the locals choice for casino gaming in Las Vegas.

“…One company that we bought for the Diamond Hill Mid Cap portfolio about a year ago is Red Rock Resorts (NASDAQ:RRR). And they’re the leading local gaming company in Las Vegas, and they have a loyalty program that nearly half of local residents have joined, and those members go to a Red Rock property multiple times per month. The stock has been held back by some capital spending that they’re putting into place to improve both some of their existing properties as well as the Palms Casino Resort which they acquired about a year ago. And with the five-year time horizon, the company has the potential to generate a significant increase in profits, and we believe the stock deserves a higher valuation…the overwhelming majority of their business is managing Las Vegas casinos that are primarily patronized by local residents.”

To get detailed insight into some other Chris Welch favorite stocks, read the entire interview at the Wall Street Transcript.