Diamond Hill Stayed Focused on Magnolia Oil & Gas (MGY) After the Geopolitical Selloff

Diamond Hill Capital, a First Eagle Investment Management company, issued its Q2 2026 investor letter for its "Small Cap Strategy". The letter can be downloaded here . The strategy returned 24.01% in the second quarter, outperforming the Russell 2000 Index's 21.49% return. Performance was positively affected by stock selection in health care and industrials, while the Fund's underweight position in information technology was the largest relative detractor as AI-related companies drove market gains. Small-cap equities benefited from strong earnings, resilient economic conditions, and easing geopolitical concerns, with technology leading sector performance while energy declined alongside lower oil prices. Despite the market's focus on AI, the Fund's strongest contributors came from businesses outside the theme, particularly in health care, defense-oriented companies, and tangible-asset industries. Looking ahead, the Fund remains focused on resilient, underfollowed companies tied to infrastructure, defense modernization, and essential industries where disciplined capital allocation and long-term demand can support value creation. Also, check the fund's top five holdings to see its best picks in 2026.

In its second-quarter 2026 investor letter, Diamond Hill Capital Small Cap Strategy highlighted Magnolia Oil & Gas Corporation (NYSE: MGY ). Magnolia Oil & Gas Corporation (NYSE:MGY) is a US-based leading independent oil and natural gas company, which detracted from the performance this quarter. On September 02, 2026, Magnolia Oil & Gas Corporation (NYSE:MGY) closed at $27.38 per share. The one-month return of Magnolia Oil & Gas Corporation (NYSE:MGY) was 10.28%, and its shares gained 10.96% over the past 52 weeks. Magnolia Oil & Gas Corporation (NYSE:MGY) has a market capitalization of $6.56 billion.

Diamond Hill Capital Small Cap Strategy stated the following regarding Magnolia Oil & Gas Corporation (NYSE:MGY) in its Q2 2026 investor letter:

"Exploration and production company Magnolia Oil & Gas Corporation (NYSE:MGY) saw shares decline after an agreement was reached to end the war between the US and Iran and reopen the Strait of Hormuz. Although the situation in the Middle East remains fragile, the market increasingly viewed the risk of a meaningful supply disruption as diminished, and the war-related risk premium that had supported US exploration and production companies earlier in the year largely dissipated."

Magnolia Oil & Gas Corporation (NYSE:MGY) is not on our list of the 40 Most Popular Stocks Among Hedge Funds . As per our database, 32 hedge fund portfolios held Magnolia Oil & Gas Corporation (NYSE:MGY) at the end of the second quarter which was 32 in the previous quarter. While we acknowledge the potential of Magnolia Oil & Gas Corporation (NYSE:MGY) 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 .

In another article , we covered Magnolia Oil & Gas Corporation (NYSE:MGY) and shared Conestoga Capital Advisors' insight on the company. In addition, please check out our hedge fund investor letters Q2 2026 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 .