Near-term Concerns Open Door for Diamond Hill Large Cap Strategy’s Microsoft (MSFT) Purchase

Near-term Concerns Open Door for Diamond Hill Large Cap Strategy’s Microsoft (MSFT) Purchase Soumya Eswaran Tue, May 26, 2026 at 1:45 PM GMT+2 3 min read MSFT Diamond Hill Capital, a  First Eagle Investment Management  company, issued its Q1 2026 investor letter for its “Large Cap Strategy”.  A copy of the letter is available to download here . The Strategy declined 2.

39% (net of fees), trailing the Russell 1000 Value Index’s 2. 10%. The performance was positively affected by stock selection in industrials and consumer discretionary, along with an underweight in communication services.

While stock selection in information technology, financials, and health care was the largest detractor from relative performance. The war in Iran is creating uncertainty in markets. However, it effectively supported the portfolio’s focus on oil-sensitive exploration and production companies.

Technology companies are under pressure in Q1 amid concerns about AI's potential negative effects on their businesses, but their competitive advantages remain stronger than their current valuations suggest. Despite these challenges, the market is beginning to expand into more attractive opportunities, especially in defensive sectors and cyclicals that do not benefit from AI. In addition, please check the Fund’s top five holdings to know its best picks in 2026.

In its first-quarter 2026 investor letter, Diamond Hill Capital Large Cap Strategy highlighted Microsoft Corporation (NASDAQ: MSFT ) as a newly added position. Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions, holding dominant positions in software, cloud infrastructure, generative AI, and gaming. On May 22, 2026, Microsoft Corporation (NASDAQ:MSFT) stock closed at $418.

57 per share. One-month return of Microsoft Corporation (NASDAQ:MSFT) was -1. 47%, and its shares lost 7.

02% over the past 52 weeks. Microsoft Corporation (NASDAQ:MSFT) has a market capitalization of $3. 11 trillion.

Diamond Hill Capital Large Cap Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2026 investor letter: "We initiated a position in global software provider Microsoft Corporation (NASDAQ:MSFT) as near-term concerns around Azure’s cloud computing growth and capacity constraints weighed on sentiment, giving us the opportunity to purchase the shares at a very attractive valuation. We believe these factors, along with the company’s evolving relationship with OpenAI, have temporarily obscured long-term competitive advantages and growth potential. " Microsoft (MSFT) Stock: Truist Raises Price Target to $675, Reiterates Buy Microsoft Corporation (NASDAQ:MSFT) ranks second on our list of  40 Most Popular Stocks Among Hedge Funds .

According to our database, 312 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the fourth quarter, the same as in the previous quarter.  While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock .

Story Continues In  another article , we covered Microsoft Corporation (NASDAQ:MSFT) and shared Yacktman Focused Fund's views on the company. In addition, please check out our hedge fund investor letters Q1 2026  page for more investor letters from hedge funds and other leading investors. READ NEXT:  33 Stocks That Should Double in 3 Years  and  15 Stocks That Will Make You Rich in 10 Years .

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