Should You Believe in the Growth Potential of KeyCorp (KEY)?

Diamond Hill Capital, an investment management company, released its “Large Cap Strategy” first-quarter 2024 investor letter.  A copy of the letter can be downloaded here. Markets rose significantly in the first quarter of 2024, providing positive returns across most regions and countries. The strategy outperformed the Russell 1000 Index in Q1 and returned 10.64% (net) vs 10.30% for the index. In addition, you can check the top 5 holdings of the strategy to know its best picks in 2024.

Diamond Hill Large Cap Strategy highlighted stocks like KeyCorp (NYSE:KEY) in the first quarter 2024 investor letter. KeyCorp (NYSE:KEY) is the holding company for KeyBank National Association. KeyCorp's (NYSE:KEY) one-month return was -5.43%, and its shares gained 32.96% of their value over the last 52 weeks. On June 3, 2024, KeyCorp (NYSE:KEY) stock closed at $14.12 per share with a market capitalization of $13.313 billion.

Diamond Hill Large Cap Strategy stated the following regarding KeyCorp (NYSE:KEY) in its first quarter 2024 investor letter:

"Portfolio activity has remained modest as valuations have risen, and it is increasingly challenging to find high-quality companies trading at interesting valuations. However, we did identify two new investments in Q1: Sysco Corporation and KeyCorp (NYSE:KEY).

Retail and commercial bank KeyCorp is a high-quality financial institution that we believe is trading at a discounted valuation. Over the next several years, we expect KeyCorp will generate improved returns and tangible book value growth as net interest margins expand and Treasurys on its balance sheet mature. We also anticipate positive loan growth following a period of balance sheet optimization and improvements among its unrealized losses as the company’s securities portfolio increases in value."

A business owner discussing commercial business loans with a bank representative.

KeyCorp (NYSE:KEY) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held KeyCorp (NYSE:KEY) at the end of the first quarter which was 49 in the previous quarter. For the quarter, KeyCorp (NYSE:KEY) posted earnings of $183 million, or $0.20 per share. While we acknowledge the potential of KEY 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.

In another article, we discussed KeyCorp (NYSE:KEY) and shared the list of best local bank stocks to invest in. In addition, please check out our hedge fund investor letters Q1 2024 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.