Oil-Dri Corporation Surges 63% as Diamond Hill Flags Successful Turnaround in Small-Cap Strategy
Oil-Dri Corporation of America (NYSE: ODC) has become one of the standout performers in Diamond Hill Capital’s Small Cap Strategy for the first quarter of 2026, with the firm attributing the rally to the company’s successful execution of its transformation plan. The stock closed at $72.06 on May 4, 2026, up 5.32% in the past month and a staggering 63.44% over the past twelve months. The company, which manufactures private-label cat litter and sorbent products, now boasts a market capitalization of $1.04 billion.
Diamond Hill, part of First Eagle Investment Management, released its Q1 2026 investor letter for its Small Cap Strategy, noting that small caps started the year strong but retreated late in the quarter due to escalating geopolitical tensions—specifically U.S. and Israeli military actions against Iran. The Russell 2000 managed a modest 0.89% gain, outperforming the Russell 1000’s 4.18% decline, while energy stocks led all sectors with a 38% surge as oil prices spiked on supply fears.
The Small Cap Strategy returned 3.41% net, beating the Russell 2000’s 0.89%. In its letter, Diamond Hill highlighted Oil-Dri as a leading contributor, emphasizing the company’s focus on resilient businesses that can navigate volatility and capitalize on market dislocations. “Oil-Dri’s transformation is not just about cost-cutting—it’s about repositioning the company for sustainable growth in a fragmented market,” the fund wrote.
However, not everyone is convinced the rally has further to run. “Look, I get the appeal—63% is a nice number on a screen,” said Mark Tobin, a retail investor from Austin, Texas, who has followed the stock for years. “But this is a cat litter company. One bad earnings miss or a shift in private-label pricing, and you’re looking at a 30% haircut. The hedge fund cheerleading feels like a setup.” Tobin, who sold his position in ODC last month, described the recent price action as “frothy” and warned that institutional narratives often lag the actual selling.
On the other hand, Linda Chen, a portfolio manager at a mid-sized wealth advisory firm in Chicago, sees the transformation as genuine. “Oil-Dri has been quietly optimizing its supply chain and expanding margins. The sorbent business is also a steady cash generator, especially with industrial demand picking up. It’s not a flashy AI stock, but it’s exactly the kind of compounder that works in a small-cap portfolio,” she said.
James Holloway, an independent analyst based in London, offered a more measured take: “The 63% run is impressive, but the market cap is still just over a billion. The question is whether the transformation has more legs. If management can continue to execute, ODC could double again. But the geopolitical risk in the energy complex is a wildcard—if oil pulls back, so could the stock.”
According to Diamond Hill’s letter, hedge fund interest in ODC is growing: 19 funds held positions at the end of Q4 2025, up from 16 in the prior quarter. Despite this, the fund noted that certain AI stocks offer “greater upside potential” and “less downside risk,” particularly those benefiting from Trump-era tariffs and the onshoring trend.
For investors considering ODC, the key will be monitoring whether the transformation gains traction beyond the current tailwinds. As Diamond Hill put it, “We acknowledge the potential of Oil-Dri as an investment, but we believe the best opportunities lie elsewhere for now.”