From Equity Research to International Investing With Heather Brilliant

Bloomberg Audio Studios, Podcasts, radio News. This is Master's in Business with Barry rid Holds on Bloomberg Radio.

This week on the podcast, I have an extra special guest. Heather Brilliant is CEO of Diamond Hill. They are a publicly traded investment manager stock symbol DHIL that have been public since day one since twenty sixteen. Heather comes for with a fascinating background, having previously been in a number of other places, most notably morning Star, and she has a very specific approach to investment management and thinking about stock selection. They do a number of things at Diamond

Thanks for having me Berry.

Well, thanks for coming in. So let's start with your background. A bachelor's and economics from Northwestern and then an MBA from University of Chicago. It sounds like the career plan was always financed. Was that the plan?

It was not the plan. I actually wanted to be a lawyer, and so I started out as a political science major, and that really came from my experience on the debate team in high school and college. It was a big part of what influenced me. And I realized after undergrad actually that the skills you learned in debate can really be applied to picking stocks, where you really have to understand both sides of the story, but you still have to come down on one side and make

Huh. Really interesting. So what was your first job out of undergraduate?

I worked at Bank of America and they had a wonderful corporate Finance training program. So since this was a relatively late decision that I came to, it was great to have those kind of six to eight weeks of training before they set us loose.

And what led to the decision to get an MBA at Chicago.

Well, actually I had pursued the CFA program first, and I learned about the CFA from colleague of Bank of America, and I got right on it. As soon as I learned about it, I thought this is great and wished i'd even known about it sooner. And then I had a role at one point where they told me to advance to the next level, I needed an MBA and it was an investing role. So I said, why would I need that? I have a CFA and they said, sorry, rules are rules, and I never wanted to be told

And how did you find University of Chicago. There are some legendary professors there, Eugene Farma, Dick Thaylor, just really an incredible line up.

There really are, And it was a very rigorous program and I learned so much from classes that I never

Right the old joke, half of our advertising dollars are wasted, we just don't know which. Once you start doing things online, that kind of changes.

You really contract that game exactly.

So you've held analyst roles and a number of asset managers. You mentioned Bank of A, you were at dry House, Capital, Cockhill Capital, morning Star. Tell us what you learned at such very institutions.

I really learned how to appreciate investment philosophies and figure out what my own personal investment philosophy was. My first equity research job was Eddrie House and they're very aggressive

And you were a morning Star for about fourteen years, tell us what brought you there? What sort of work were you doing?

So originally I went there because I liked their equity research philosophy, and most people don't even know they do equity research even to this day.

And you think morning Star, you immediately think of the mutual fund Star system.

Yeah. Absolutely. But they had a whole team that was growing at the time because of the whole Spitzer settlement, and so they were hiring lots of people to come in and be be equity analysts, and so it was just a great opportunity to get to apply a more

Huh, very interesting. I specifically recall what I thought at the time was a very bold and brave research report that morning Star put out looking at the history of their Star rating system, and they pointed out, if you only could know one thing about a mutual funds, if you knew nothing but the cost, that would generate a little bit of positive return versus following any other system.

It is fascinating how big a discrepancy that creates, because you know, the expense is a sure thing and the expected future returns are very uncertain, And so I think you have to take expense into consideration.

So you become CEO of Morning Star. Am I pronouncing this right? Is it Australia or Australia Asia?

It was Australasia. But it's important to know that Australasia really means Australia, New Zealand and the Pacific Islands. Oh, it doesn't actually mean all of Asia.

I got it. So did you have to relocate were you? Were you working there?

I did? Yes, My family and I moved to Sydney, Australia.

And what was that like? Sidney looks like it's a blast.

I consider Sydney one of the most majestically beautiful cities in the world. It was so wonderful every day we lived there, I felt.

Lucky and livable. Right, It's not like Hong Kong or New York or some other cities that can be a little much to take if you're not from there.

It's very livable from like a human interaction standpoint, yes, but it is very expensive. So I do think a lot of people struggle, especially you know when you see some cities that have suffered with very high housing costs. Sydney is definitely right up there.

Sure, so you're morning Star for a while, you leave for a year and come back. Tell us what brought you back to morning Star.

I left because I thought I was being offered my dream job, and so I went to a hedge fund for a year. I learned so much in that year I'll never regret doing it, and it was the only time in my career where I've had responsibilities for recommending shorts as well as lungs. So I think it was

And then post morning Star, you end up in the late twenty tens as CEO of First State Investments for the Americas. Tell us a little bit about that role and what you learned being CEO there.

Yeah, So, I mean, I love my time in Australia and we were there almost four years and at the end of that time, I really felt like as much as I had learned and experienced at morning Star, it

And if I recall correctly, Mitsubishi Bank during the financial crisis was a financer of a couple of pretty substantial US banks, maybe Morgan Stanley, I don't remember, is that right, And so tell us a little bit about what your experience was like you were there before Mitsubishi brought them.

Correct My last day was the day the acquisition closed.

Oh, so would you helped facilitate this? What was your role with that acquisition?

I mean the deal was definitely done in Japan and Australia, not in the US. So I certainly had a lot of interaction with the team from Mitsubishi that was based in New York and kind of helping facilitate some of the transition that would that would be happening. But I had already taken the role with Diamond Hill, and so I helped them, you know, for a little bit of time to kind of navigate through the final aspects of the transition.

And I don't recall if this was on the podcast with John Mack or in John Mack's book, but he had nothing but really nice things to say about Mitsubishi. I mean, they helped save Mooyants Stanley. He was certainly appreciative of that, but he seemed to think that there were no nonsense, They looked at the data, they made a fast decision in one way or another. He was pretty pleased with them. I'm assuming you had a similar experience.

Yeah, And I'd say one that's so great, And just to overgeneralize about Japanese bank owners is that they tend to be very long term oriented, and so they're making decisions about investing for the future and not just about you know, making quarterly earnings or any kind of short term pressure.

So we'll talk about long term investing in a bit. Tell us what brought you from First State Investments to Diamond Hill.

Given some of the transitions with First Date, I knew it it was time to maybe consider the next opportunity, and so I had actually interviewed for a couple of things when I got a call from a recruiter about Diamond Hill. I had actually never been to Columbus, Ohio before I went there to interview, and so when the recruiter called me, I said, you know, it sounds really interesting.

So since you mentioned investing for the long run amongst the Japanese banks on the Diamond Hill Firm website, your tagline is invested in the long run. Shouldn't that be the Norman asset management? Aren't we all supposed to be invested in the long run?

I think it absolutely should be the norm, because it is generally what our clients are seeking. And I think there's just so many pressures that cause so many investors to think shorter term, and even investors who claim to be long term are often thinking in one year increments as opposed to the more like five year increments that were trying to think about.

So is that the fault of the end investor? Is it the institutions that really look at quarterly results? I know some hedge funds look at monthly or weekly results. That seems to be you know, nothing more than random noise, but they seem to focus on it. Who should we be blaming about this sort of short termism that can be endemic in the investing world.

I don't know if we can really blame any one party. I think it's kind of systemic at this point where you have companies reporting earnings on a quarterly basis, so many public companies expected to issue guidance and then meet that guidance or else, you know, essentially, And I think a lot of investors have figured out how to effectively make money for their clients with shorter term time horizons.

So we kind of joke about the ill equidity premium, but really we should be talking about the long term premium that's being overlooked. Maybe there's a substantial market and efficiency there.

I think there is, because you know, while I do think that clients like to invest for longer time periods, they only have so much patience and when you take a really long time prizon, you can have multi year periods of underperformance. And so that's not something that every

Really really interesting. So let's talk a little bit about Diamond Hill stock symbol DHIL. What's it like running a public company. They've been public since nineteen ninety six, So.

Yes, it has been a public company really since the founding because essentially there was an already public business that the founder of Diamond Hill kind of merged into or used as the beginning of Diamond Hill. So there was never a moment where the company went public. It's really just been a factoid of the whole history of it.

It's been publics from day one. Yes, huh. So earlier we were talking about investing for the long haul. What sort of challenges are there when shareholders are looking for a quarterly results that looking for revenues and improvements and profits. How do you get people to focus on the long term when every three months there's a snapshot of here's where we are in the cycle.

There's nothing we can do to avoid the fact that we need to publish our results every quarter. But there are actually things that a lot of public companies do that are not a requirement. For example, quarterly earnings calls and guidance, and so those are things that we don't participate in because.

No guidance, no quarterly call. Correct, just you release the numbers and let the chips full where they may exactly.

And the reason why that's so important is because we don't want to on a quarterly basis be essentially pressured into focus on a shorter time period by people asking questions about a shorter time period. And we do think

Diamond Hill has always been public from day one. The founder sort of reverse merged the company into an existing public entity. Does that mean the float isn't giant that a lot of the lot of the holdings are held by founders. How much of the stock publicly trades.

It's actually pretty pretty big. It's about eighty percent, so it is just under twenty percent owned by management and directors. I think actually, if you go public, there tends to be a more of a concentration in owners holding founder stock exactly. But when the situation is more like using stock to fund the beginning years of the company. I think it ends up leading to a more diverse shareholder okase.

And you mentioned founders and managers. What about employees. Do they have the opportunity to participate in an ESOP or anything like that.

We have a a very strong commitment to an ownership mentality, and we think that owning a piece of the company is part of that. It's really just a small part of it in the grand scheme of things. It's more about thinking like an owner when we're making every day decisions.

You mentioned ownership mentality. As I was clicking around your website, I found a fascinating document that shows each of your portfolio managers by name, the funds they manage and how much of their own dollars are invested in their own managed funds. And very often these are seven figures or more millions of dollars invested in their own funds tell us a little bit about that.

I'm so glad you brought that up, because I do think it's a really big differentiator for us. We have really focused on the fact that if we're invested alongside our clients, we're making decisions for them that will be in our best interest and their best interests. So we really think that it creates alignment to have our portfolio

What's a better advertisement for a mutual fund than the fund manager having millions and millions of dollars invested in that exact fund.

Absolutely.

So there's another line on your website that kind of quote my attention, our curiosity uncovers unique opportunities. Tell us a little bit about that.

So on the equity side in particular, a lot of what we do really is to do very deep fundamental research on companies from a bottom up perspective, and so we're constantly looking for new ideas and opportunities to put in the portfolios. But despite that constant curiosity, our portfolios do not have very high turnover because we are taking such a long term perspective. So we're looking for businesses that are fundamentally mispriced relative to what we think, you know,

I'm hearing a couple of things that I want to ask some follow up questions. So bottoms up stock selection pretty obvious. It's not that you're doing sector rotation or market timing. You're purchasing specific companies. But then the added layer is you're purchasing them at a discount to intrinsic value. So this sounds a lot like traditional value investing, which has had a rough couple of years. How do you differentiate yourself from traditional value investors?

I mean, I think there's a lot of what we do that I would say is not too far from being traditional value investor. I'd say both for Diamond Hill as for a lot of investors. There's kind of an ideal out there where you want to buy a company that has a strong competitive advantage training at a discount to what you think those future cash flows are worth. That is kind of the fundamental perfect investment opportunity for

When I hear competitive position, I immediately think of the morning star mote you described earlier. Tell us how that works into your investing philosophy.

It was interesting coming to Diamond Hill. I think one of the reasons why the portfolio managers were comfortable hiring me, as you know, the first external CEO that they had ever had, is because I had very widely talked about economic modes and investing with an eye on sustainable competitive advantage. But even in the book I wrote in twenty fourteen, you could see that the focus on competitive advantage can never be absolute. You always have to take valuation into consideration.

So valuation, high quality, competitive advantage. Are we leaving out any other specifics that are go into the investing stock selection process?

I mean very concentrated portfolios and a long term perspective.

So I love when I hear concentrated portfolio because I immediately think high active share, no closet indexing, exactly. So when you say concentrated, how concentrated is concentrated?

So our large cap strategy has about fifty positions in it.

That's pretty concentrated, exactly.

So I think that gives you an example. You know, well, small cap is more than that, but it's still less than one hundred.

Small cap is always more than large cap. We're going to talk a little bit about small cap later, which has been kind of fascinating what's been going on in that space lagging for as long as it has. But before I get to that, I want to talk about not only how you express the philosophy in investments, but the different strategies you run in equity and fixed income. I know you do separately managed accounts, you do mutual funds, and you also do a C explain those choices.

So essentially, we try to offer our intellectual property to our clients in whatever vehicle that they need it to be in. You know, we started out kind of focused on mutual funds as the vehicle, and we've really diversified away from that because of client interest. Clients have asked us for separate accounts model delivery CIS and we have

Be able to say no and close a fund down, not just fire hose of capital.

Coming up exactly. And as many very popular ETFs show, and as you know, just as fundamentally true, you cannot close an ETF today, and so in order to take capital in an ETF, we have to figure out some kind of solution to that, and we have not figured out a solution.

That's really interesting. So I know you're running about twenty nine billion total. How big is the biggest fund where you say, okay, we're we're pretty close to capacity here.

So our large cap strategy was closed to new investors until about a year ago. And so over the course of history, we've closed for strategies over time. And you know, generally, i'd say we take a lot of things into consideration. Our clients actually like to be able to put new clients of theirs into the same strategies, and so it can be very disruptive for client bases for you to

By the way, a little industry jargon. I always laugh when I say that. We listen, we laughed since the jargon all the time. So small and mid cap, yes, So I would imagine the large cap has bigger capacity eight ten, twelve billion. Where do you start to run into Hey, for fifty stocks, this is as big as we want to get.

Yeah, I mean, we think the capacity for that is somewhere around twenty five or thirty billion.

Oh so you haven't really run into issues with that yet.

Yeah, I mean I would say that's for the strategy overall. You know, So it partially depends on how much is in the fund versus in you know, other areas.

But in a small cap or a SMID you can say to your investing partners, hey, we're getting to the point where we're just about capacity constrained. Don't be surprised if this closes next quarter, next year. How far out do you plan it?

I mean generally, if it's flows related, it's easier to plan. If it's market related, it's harder, because you know, if all of a sudden, small caps make it come back, you know, when you didn't think you were anywhere to close to closing, it can come up more quickly. With large cap I'd say it also depends on how low you go in terms of market cap, right, how small a company will you put into a strategy that is

Huh, that's really interesting. So what do you use as a benchmark for the large cap fund? Is it just the SMP five hundred or something a little broader.

We use the Rustle at one thousand, so much broader.

Yeah, I was going to say, if you want to just arbitrarily draw a line in the sand the top half of the SMP five hundred, I would imagine those two hundred and fifty stocks can be considered large cap, or like, what's the line in the sand above ten billion, above twenty five billion? It's hard to even judge when we have so many companies that are trillion dollar market caps these days.

Well, that actually brings up a really interesting point in time, I'd say, with our markets being so driven by such a small number of stocks, and we generally think that creates opportunity not only in the large cap space, but

You know, I'm so glad you said that. Every time I have a discussion about passive or indexing with people who are convinced that's gonna destroy the structure of the market, my answer is always, wouldn't that create more inefficiencies elsewhere in the market if all these flows are blindly going into passive And there's certainly a reason for that, but tell us about how that leads to inefficiencies that savvy investors can take advantage of.

Yeah, I think you can see this particularly in smaller cab companies right now, where you know, as you alluded to earlier, the Russell two thousand versus the Russell one thousand has basically underperformed by ninety five percent from the end of twenty sixteen until now.

That's amazing, it's stunning.

And you know, it's true that smaller cab companies are much more challenging because you know, forty ish percent of small cap companies don't make a profit, and so there are.

I think where it's seven percent of large of the s and P five hundred is not profitable, which is a fraction of what it was in the late nineties. Much more of the big caps weren't profitable. Today they're all money machines. The small caps really are kind of struggling against that.

And the interesting thing is that small cap active managers have outperformed for out of three out of the last four years. But in small cap about sixty percent of assets are invested passively. It's actually only fifty percent in large cap. So it's kind of surprising that investors are relying on passive strategies in a category where active management makes a huge difference.

So let me make sure I'm hearing that correctly. Sixty percent of small cap is indexed versus fifty percent in large cap, and more small cap managers are beating their benchmark than large cap managers? Am I getting that right exactly? So that kind of goes back to, hey, the more indexing there is, the more opportunities there are for inefficiencies to be discovered.

Yes, but let's say that one element of reality I think that has for managers who are focused on smaller cap companies is that you can't buy an undervalued company in small cap necessarily and assume that it's going to appreciate because of valuation, because we don't know when or what will cause the market to rerate small cap. And so you know, this has been going on for you know, basically a decade or more depending on how you look

That's dividends and buybacks in terms of you know, David Einhorn said something very similar when people were saying the market structure was broken by passive and I know he's in that camp. He said, it made us re think our approach to valuation and if merely buying inexpensive stocks wasn't going to get you the performance you need, well, then you had to find the stocks that were doing something to raise their evaluation themselves. Mostly through return of capital to investors.

Yeah, that was a great episode. I think Einhornhet had a lot of really good points that I think we're.

So you agree with him. It's hey, we like these stocks that are actually participating and there are opportunities being created by the rise of passive. So let me ask one other question about the rise of indexing. It has helped to contribute to fees coming down across the industry. You're a public company, how do you deal with those fee pressures that seem to be endemic throughout all of investing.

I mean from the beginning, we really try to take a very thoughtful approach to setting our fees, and you know, we really try to think about, you know, what do we believe the excess return is that we can generate over the long run, and how can we charge a price for that so that we can make sure we can pay the you know, investment talent that we need in order to generate those returns, but also make sure that the shareholders of the firm are getting you know,

So we were talking earlier about small caps. They've been lagging not just since the pandemic but pretty much the past decade. What do you think the reason for that is? Is it access to capital or into national markets? What's been holding small caps back?

I actually think there's a couple of things, but the biggest is that small caps have not done so poorly as much as large caps have just done so excellently. And so I think that's partially these five stocks really driving the market that we're really seeing come to a head this year, but really has been going on for the last several years, and we've seen concentration in the large cap side of the market among those five companies

Right. I have a friend who's a trader who says, hey, you can't eat relative performance, right exactly. So we talked a little bit earlier about profitability. Ninety three percent of big caps are profitable, but only a little more than half of small cap stocks are profitable. How important are earnings to the small cap sector as a driver of returns.

I mean, I think quarterly earnings probably should be less of a driver for small caps because you know, you have to take a long term perspective and really think

And it seemed like the large cap in megacap stocks did a great job in refinancing before the pandemic, small caps did not have access to the same amounts of capital at the same price as How big of a factor is that.

I think it's a huge factor. And you know, and you also see less leverage, you know, certainly as a proportion of cash flows when you're looking at large caps versus small caps, so they're more levered and they did not have the same access to benefit from all that cheap capital when it was available.

Diamond Hill is known mostly as a stock shop, as an equity shop bottoms up stock selection, but you also do fixed income and bonds. Tell us a little bit about the fixed income side of the work.

Yeah, so about four billion of our assets under management are in fixed income strategies today and that's really grown over the last couple of years because we brought in a team in twenty sixteen have been building a track record since then, primarily in two strategies, core and short duration securitized, and in both of those strategies are I would say our biggest point of differentiation is our focus on securitized assets, which kind of gives us the opportunity

And when I think of securitized assets, we typically think of mortgages and things like that. What sort of securitized assets so you guys playing with.

Yeah, certainly mortgages is on the list. I'd also say asset backed securities, which can include things like you know, credit card receivables or car loans or things like that that I think are more consumer oriented. And so that's an area where there's been a lot of concern as concern about recession, you know, ebbs and flows. You definitely see people's concern about asset back securities move in line with that.

Yeah, the recession concerns seem to have been a perennial miss since the last recession, since the COVID recession, right, which was a hot minute, and then all people were doing was expecting recession in twenty one, in twenty two, and even during the downturn in the market in twenty two. This is it, this is what's going to finally cause a recession and then a giant snap back in twenty three. I know, you guys are bottoms up stock pickers. How impactful is all that macro noise on your process?

I mean, I'd say it actually creates more opportunity than anything, because when the market starts really worrying about a recession, then it generally undervalues companies that are more cyclical and in terms of their long term cash flow generating abilities. And when the market's not at all worried about a recession, then you can generally find opportunities in more defensive areas

So twenty twenty two must have been A friend from the military always describes that as a target rich environment. What were you guys doing in twenty twenty two when the SMP was down about twenty percent and the Nasdaq was down about thirty percent.

Yeah, I mean, I think those are good examples, but I actually think the environment is better right now because really, yes, because we're in a situation where while the market is up, you know, double digits for this year, that's really a kind of high level perspective that really obscures what's going on under the surface, where there's a tremendous amount of volatility.

And we're recording this in July, so let's put some numbers out there. The first half of the year of twenty twenty four SMB five hundred up I think fifteen point three percent, but the average stock in the S and B five hundred was only up about six percent and change for the first half of the year. And I want to say, the average stock in the second quarter in the SMP was slightly negative. That's right down, down one point three percent something along those lines.

Yep.

So really that seems to really show you what a wide dispersion we have in performance. How does that play into your bottoms up stock picking?

I mean, I think it creates opportunity because we see companies getting sold off that are really great fundamental businesses but you know, perhaps are going through a tough time or miss earnings for whatever reason. On the flip side, you see companies that you know, we really believe in and fundamentally in the long term, that we may already own, also selling off, or companies like the ones leading the

I'm glad you brought up that these aren't like just ephemeral ideas like we saw in the dot com era. I think the numbers on the Magnificent Seven collectively they do about two trillion dollars in revenue and about three hundred billion dollars in profits. Those are giant numbers, kind of hard to argue there's a bubble amongst them. Hey, there's some speculation and there's a little bit of over enthusiasm,

Yes, I mean, I think that is true. There's still a valuation consideration to be applied, and I think you could argue that they're not meaningfully overvalued right now, but it really all comes down to the future growth expectations and their ability to keep on delivering like this. And so you know, if for whatever reason, you know, regulation or some change in the environment caused that to slow down, then then it's a lot harder to justify these valuations.

I was clicking around the website looking at some of the white papers you guys put out on a regular basis. Let's talk about one or two of those, uncovering opportunities in commercial real estate, the power of location. Let's talk about stepping into a dangerous area. I think the for office space anyway per square foot nationally has fallen from about three point fifty to one ninety nine. Tell us a little bit about opportunities in commercial real estate.

I think commercial real estate, as our bond managers would say, is you know, clearly an area where the baby gets thrown out with the bathwater. And so if you focus on super high quality opportunities, then I think you can really find, you know, misprice securities essentially, because everybody is so worried about commercial real estate, and that worry is not without reason. To your point, it's.

Particularly an office space, but there's a lot more to commercial real estate than just office space.

Absolutely, But I think in you know, very high quality office. They're finding opportunities as well, and so it's partially I think a matter of looking for where investor expectations get so lumped together with the overall category, and the bottom up perspective can show actually there are individual buildings or opportunities in commercial real estate that can provide opportunity.

What about geographies? Diamond Hill is low in the United States, but it seems that your experience has been all over Australia and Asia. Japan has had a great year. We're starting to see signs emerging market is doing better. Europe the perennial laggard, even Europe is starting to show signs of coming alive. How do you look at the rest of the globe. What are your constraints?

So we have an international equity team that really focuses on looking for opportunities outside the US, and they travel the world meeting with management teams and you know, really uncovering the death that you can't get just by you know, staying in the US looking at the data. They do obviously spend a lot of time doing that, but I'd say that's really led to a focus on areas that are more bottom up oriented. So you know, just like on the US side, we're really looking for individual companies

What about strategic capacity management? How does that improve client outcomes?

So essentially that kind of goes back to what we were talking about before, where it's really important to consider the capacity of strategies that we manage so that we can put our existing clients interests first. And so when we look at how much we think we can manage in a strategy, we try to take into consideration what

And what about long short. You have a fund that runs long short, tell us a little bit about that. What's the thinking When I hear bottoms up stock picking? I no longer think about short selling. But obviously if you identify something that is mispriced to the downside, perhaps you can also identify things mispriced to the upside.

Yeah, that's basically the philosophical approach that we've taken. And I'd say there's a few people on our team, one of the portfolio managers on that strategy, and a couple of analysts who have really developed expertise thinking about the shorts and so, but fundamentally it really is about valuation. Now. It's harder, obviously when you're trying to short an overvalued company than buying an undervalued one, because you can only

Are these one thirty thirty funds or are they market neutral funds? How do you structure them?

They are essentially sixty percent that long. So that's been our focus historically and really what our clients have asked of us. But it is an area that I think could be ripe for innovation because it is easier to think about, you know, market neutral strategy in an environment where interest rates are positive than it is when they're zero, and so I think, you know, not to say you couldn't do it when they're zero, but I just think it's a lot harder to make the math work.

Tina made it very difficult to be on the short side when was no alternative to equities. Was pretty much the only place, only place you could go, but today with rates over five percent, I think the last time I looked at the money market fund it was about five and a quarter somewhere around then. I know you when we were talking about fixed income, you mentioned securitized assets. What about other forms of private credit? It's been probably the hottest area in the market over the past few years.

Yeah. I mean, whenever there's an area of the market that is hot, I would say my first instinct is don't go there. And private credit, I think, I think there are a lot of reasons why private credit has done so well. But you know, and I do think the line is a little blurry in fixed income, and sometimes people call things private credit that are arguably in scope for some things that we might take a look at.

I only have you for a few minutes more. Let's jump to our favorite questions that we ask all of our guests, starting with what's been keeping you entertained these days? What are you watching or listening to?

So one show I've really enjoyed is The Bear. I haven't watched the third season yet, but.

We're about halfway through it and it's really interesting.

Okay, good. I just think it's a great show. First of all, I'm from Chicago, and so I love the Chicago connection and constant visuals from my favorite city. And then I just think their character development is unbelievable. So it's been I've really enjoyed it.

Well, not just Bear and Sydney, but watching Richie develop into from a caricature to a person has really really been fascinating, culminating with the Forks episode, I think with season two really was very amazing. Let's talk about your mentors who helped shape your career.

So I was very fortunate early on in my career to have a couple of kind of managers and leaders that really helped set the stage for a productive future career. Even at Bank of America. While I didn't end up staying there a tremendously long time, I had the most incredible first manager, and he really helped me see that there were lots of different areas in finance and investing to go into and that he'd be supportive regardless, and I actually still keep in touch with him to this day.

So let's talk about books, and I have to mention your book, Why Motes Matter, tell us a little bit about that, and then we'll jump into what you're reading currently.

So Why Modes Matter was really an encapsulation of thinking about competitive advantage and valuation and making investment decisions, and that does encapsulate morning Stars investment philosophy, and certainly they commissioned the book or funded it, I would say, but it was a really great experience too because we were able to get a lot of the equity research team

And tell us about what you're reading now and what are some of your favorite books.

So I just started Shipwar. I don't know if you've read that, but I have it.

It's in my queue. I haven't started it yet, but everybody seems to love it.

It's fascinating, and I think the thing that's so great about it is there's just so much around the topic of semiconductors and Silicon Valley and AI and like really just understanding the fundamental underpinnings of how the industry got started and where the power lies and why TSMC is

Larsen, Yeah, Eric Larson, Yeah, I have a whole stack of his stuff. Everything he writes is so fascinating and dense and absolutely reads like a novel.

Yeah. I read something else, I can't remember the name of it, about the evolution of Edison and Tesla and Westinghouse right around the turn of the century. That I think is another fascinating example of this category where you know you're learning about real events and people, but in a way that feels like you're reading a novel. So I think there's a lot of great examples like.

That, really really interesting. Our final two questions, what sort of advice would you give a recent college graduate interested in a career either investment management or finance.

I'd say two things. First, seek experiences that will help you get the role that you think you want in the long term. And that one is really I think about not only getting experiences from your job and what you're doing day to day, but also, you know, looking for opportunities to you know, let's say you're an equity analyst,

And our final question, what do you know about the world of investing today you wish you knew thirty or so years ago.

I would say that trends last longer than you think they possibly could. And so I mean you could see that right now in the small cap versus large cap performance that we talked about. You could certainly see it

Thank you, Heather for being so generous with your time. We have been speaking with Heather Brilliant, CEO of Diamond Hill. If you enjoy this conversation, well check out any of the five hundred previous discussions we've had over the past ten years. You can find those at iTunes, Spotify, YouTube, Bloomberg,

But as think