Diamond Hill Capital Exits International Paper Amid Fundamentals Miss
The fund reported a 2.39 per cent net decline in the first quarter of 2026, trailing the Russell 1000 Value Index as it navigates sector rotation and geopolitical uncertainty.
Diamond Hill Capital Large Cap Strategy, managed by First Eagle Investment Management, has fully exited its position in International Paper Company (NYSE:IP) during the first quarter of 2026. In its quarterly investor letter, the fund stated that the decision was driven by International Paper’s fundamentals falling short of expectations during the holding period, prompting a reallocation of proceeds to opportunities deemed more attractive.
The strategy reported a net decline of 2.39 per cent for the quarter, underperforming the Russell 1000 Value Index, which returned 2.10 per cent. Performance was positively impacted by stock selection in industrials and consumer discretionary, alongside an underweight position in communication services. Conversely, stock selection in information technology, financials, and health care served as the largest detractors from relative performance.
International Paper Company, a leading manufacturer of renewable fibre-based packaging, closed at $31.29 per share on May 22, 2026. The stock has faced significant headwinds, recording a one-month return of -4.17 per cent and a 52-week loss of 34.36 per cent. The company holds a market capitalisation of $16.57 billion.
Despite the exit, interest in International Paper remains present across the broader market. At the end of the fourth quarter, 37 hedge fund portfolios held the stock, an increase from 28 in the previous quarter. However, Diamond Hill Capital indicated that certain artificial intelligence stocks offer greater upside potential and carry less downside risk compared to International Paper.
The fund noted that technology companies faced pressure in the first quarter due to concerns regarding AI’s potential negative effects on their businesses, though it maintained that their competitive advantages remain strong. Additionally, the war in Iran created market uncertainty, which the fund noted supported its focus on oil-sensitive exploration and production companies.
