Diamond Hill Capital, an investment management company, released its “Small Cap Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In Q1, markets were uneven due to the new presidential administration's activity, leading to concern about the future. The Russell 3000 Index fell by 4.7% in Q1, the first quarterly loss since Q3 2023. Diamond Hill Small Cap Fund returned -11.56% in Q1, trailing the Russell 2000 Index’s -9.48% return. For more information on the fund’s top picks in 2025, please check its top five holdings.

In its first-quarter 2025 investor letter, Diamond Hill Small Cap Fund highlighted stocks such as Mr. Cooper Group Inc. (NASDAQ:COOP). Mr. Cooper Group Inc. (NASDAQ:COOP) is a residential loan service providing company. The one-month return of Mr. Cooper Group Inc. (NASDAQ:COOP) was -8.95%, and its shares gained 44.66% of their value over the last 52 weeks. On May 5, 2025, Mr. Cooper Group Inc. (NASDAQ:COOP) stock closed at $117.54 per share with a market capitalization of $7.521 billion.

Diamond Hill Small Cap Fund stated the following regarding Mr. Cooper Group Inc. (NASDAQ:COOP) in its Q1 2025 investor letter:

"On an individual holdings basis, among our top contributors in Q1 were Mr. Cooper Group Inc. (NASDAQ:COOP) and UGI Corporation. Mortgage servicing company Mr. Cooper Group executed well during a particularly challenging mortgage environment as interest rates have remained high relative to historical levels. Importantly, Mr. Cooper’s business model is specifically designed to help protect it from just such periods: As rates go up, the value of its mortgage-servicing rights business goes up, giving it the ability to continue generating healthy cash flows even as the mortgage industry overall may slow. Shares were additionally boosted by the announcement on the final day of the quarter that the company will be acquired by Rocket Companies in an all-stock deal projected to close in the fourth quarter of this year."Why Mr. Cooper Group Inc. (COOP) Went Up On Monday?

A direct-to-consumer channel customer checking their mortgage account online.

Mr. Cooper Group Inc. (NASDAQ:COOP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held Mr. Cooper Group Inc. (NASDAQ:COOP) at the end of the fourth quarter, compared to 37 in the third quarter. While we acknowledge the potential of Mr. Cooper Group Inc. (NASDAQ:COOP) 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.

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In another article, we covered Mr. Cooper Group Inc. (NASDAQ:COOP) and shared the list of stocks Jim Cramer recently discussed. In addition, please check out our hedge fund investor letters Q1 2025 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.

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