| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.0% | -0.4% | 1.1% |
Heartland Value Plus Fund focuses on small-cap value investing using their 10 Principles of Value Investing framework, seeking companies with attractive valuations, quality balance sheets, and sound business strategies. The fund returned -0.10% in Q4 2025 versus 3.26% for the Russell 2000 Value Index. The managers are optimistic about market broadening as small-cap earnings are expected to grow around 15% in 2026, slightly exceeding S&P 500 forecasts. Falling interest rates should disproportionately benefit small caps due to their sensitivity to refinancing costs. Key holdings include Lamar Advertising, which benefited from strong pacings and upcoming election cycle advertising, and new position WESCO International, positioned for margin expansion and double-digit EPS growth. Builders FirstSource detracted from performance due to housing market weakness but offers significant upside potential when housing fundamentals normalize. The team confirms investment decisions through management actions including share buybacks, insider buying, and dividend growth, with a majority of portfolio companies active in at least two of these areas.
Small-cap value investing focused on companies with strong fundamentals, attractive valuations, and management teams that demonstrate confidence through buybacks, insider buying, and dividend growth, positioned to benefit from broadening market conditions and falling interest rates.
The market appears to be broadening out, giving small-cap investors reason for hope. While earnings growth and demand dynamics are improving, this is an opportunity for fundamentally driven investors to seek out well-run businesses with strong self-help and capital allocation plans that are well-positioned to take advantage of the economic tailwinds that are forming.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 12 2026 | 2025 Q4 | BLDR, LAMR, WCC | Advertising, Buybacks, dividends, industrials, real estate, small caps, value |
ITGR CMCO ALEX LAMR WCC BLDR |
Small-cap earnings continued to gain strength with expected profits to grow around 15% in 2026, slightly exceeding current forecasts for the S&P 500. Small caps are more sensitive to refinancing costs and should benefit disproportionately from falling rates. The market is beginning to broaden out as small value stocks outpaced the majority of the Magnificent 7. The strategy focuses on bottom-up fundamentals based on the 10 Principles of Value Investing, requiring attractive valuations, quality balance sheets, and sound business strategies. The team seeks undervalued companies with low debt, positive earnings dynamics, and competitive advantages. Value investments are confirmed by share buybacks, insider buying, and dividend growth. The team looks for improving fundamentals confirmed by active share buybacks as a sign of management confidence in future profits and cash flows. A majority of companies in the portfolio are active in buyback programs. LAMR has been active on its buyback program and BLDR has been a consistent acquirer of its own shares through buybacks. Growing dividends are viewed as confirmation of improving fundamentals and management confidence in future cash flows. The team seeks companies active in dividend growth as one of three focus areas for capital allocation. LAMR increased its dividend this year as part of its capital allocation strategy. Lamar Advertising was one of the top contributors to performance in the quarter as the nation's leading out-of-home advertising company. LAMR's pacings have been strong, which should lead to positive earnings growth in 2026, with additional boost expected from mid-term election cycle political advertising spending. Builders FirstSource is the largest distributor of lumber and building products materials for contractors and home builders. The company has been a consolidator of smaller regional lumberyards and made a push towards increasing value-add building products such as pre-assembled trusses to save builders time and labor. |
| Oct 9 2025 | 2025 Q3 | BRC, MTRN, PBH, PHIN | Buybacks, dividends, earnings growth, small caps, valuation |
BRC PHIN MTRN PBH |
Heartland notes that small-cap earnings have turned positive for the first time since 2021, driven by improving demand and policy easing. The fund emphasizes companies executing self-help strategiescutting costs, repurchasing shares, and raising dividendsto enhance margins and shareholder value. Strong contributors included Brady Corp, Phinia, and Materion, reflecting disciplined capital allocation amid rate cuts. |
| Jul 11 2025 | 2025 Q2 | GTES, NVST, SIMO | Balance Sheets, cash flow, Margin Of Safety, valuation, value |
GTES SIMO NVST |
The letter emphasizes disciplined value investing focused on companies trading below intrinsic value due to cyclical, temporary, or behavioral mispricing. Management highlights balance sheet strength, cash flow durability, and downside protection as critical in a late-cycle environment. The fund positions value as a long-term alpha source as market leadership broadens beyond expensive growth stocks. |
| Mar 31 2025 | 2025 Q1 | FCFS, GTES, THG | - | - | |
| Jan 13 2025 | 2024 Q4 | FBK, SMTC | - | - | |
| Sep 30 2024 | 2024 Q3 | GTES, HAYW | - | - | |
| Jun 30 2022 | 2024 Q2 | KMT, SAIC | - | - | |
| Apr 15 2024 | 2024 Q1 | KMT, MHK | - | - | |
| Oct 1 2024 | 2023 Q4 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AdvertisingDigital advertising represents a secularly fast-growing space with Meta as the dominant leader serving over 3.5 billion daily active users. AI-driven content recommendation systems and granular consumer behavior visibility enable highly precise ad targeting, making these platforms essential for businesses. |
Digital Targeting Programmatic Social Search |
BuybacksShare repurchases in 2024 and 2025 hit consecutive records as companies raced to meet Tokyo Stock Exchange capital efficiency mandates. Buybacks were a primary driver of the market's 20% climb in the first half of FY2025. |
Share Repurchases Capital Efficiency TSE Mandates Shareholder Returns Records | |
DividendsJapanese companies paid record dividends of ¥18 trillion for fiscal year ending March 2025, a 13.8% year-over-year increase. Many major firms have adopted progressive dividend policies guaranteeing dividends will never be cut, only maintained or increased. |
Progressive Dividend Record Payouts Shareholder Returns Yield Growth | |
MaterialsMaterials sector was one of the largest positive contributors to returns during November. The Fund's exposures to materials companies like PLS Group, Genesis Minerals, and Northern Star were among the largest contributors to performance. |
Mining Gold Lithium Resources Commodities | |
Small CapsSmall caps getting strong start in 2026 supported by easing monetary conditions and constructive fiscal backdrop. Small caps more sensitive to economic cyclicality which is overdue for expansion. Expected to grow at better pace than large caps in 2026 after long period of underperformance. |
Value Growth Cyclical Monetary Policy Fiscal Policy | |
ValueManager emphasizes investing in controlled companies trading at significant discounts to NAV, with European holding companies showing discounts of 30-68%. The strategy focuses on securities mispricing where real value exists, contrasting with overvalued technology stocks. |
Discounts NAV Mispricing Undervalued Controlled | |
| 2025 Q3 |
DividendsJapanese companies paid record dividends of ¥18 trillion for fiscal year ending March 2025, a 13.8% year-over-year increase. Many major firms have adopted progressive dividend policies guaranteeing dividends will never be cut, only maintained or increased. |
Progressive Dividend Record Payouts Shareholder Returns Yield Growth |
EarningsEarnings are central to the manager's optimism with consensus expectations pointing to meaningful acceleration in small-cap earnings in 2026, with growth projected in the low-to-mid teens and exceeding that of large-cap companies. This anticipated rebound reflects easier year-over-year comparisons, improving operating leverage, and broadening demand across cyclical and value-oriented sectors. |
Earnings Growth Operating Leverage Cyclical Sectors Consensus Estimates Earnings Revisions | |
Self-Help |
||
Small CapsSmall caps getting strong start in 2026 supported by easing monetary conditions and constructive fiscal backdrop. Small caps more sensitive to economic cyclicality which is overdue for expansion. Expected to grow at better pace than large caps in 2026 after long period of underperformance. |
Value Growth Cyclical Monetary Policy Fiscal Policy | |
ValuationAI-related companies continue to command premium valuations while other sectors remain reasonably priced. This valuation divide continues to guide investment activity, with the fund remaining wary of companies trading at exceedingly high valuations that imply exceptional multi-year earnings growth. |
Premium Divide Discipline Stretched Reasonable | |
| 2025 Q2 |
ValueThe manager continues to find attractive value opportunities despite expensive markets, purchasing undervalued companies like Centene, GlaxoSmithKline, Carrefour and PayPal trading at low multiples with strong fundamentals. |
Undervalued Low Multiples Contrarian Opportunistic |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 9, 2025 | Fund Letters | Bradford Evans | PBH | Prestige Consumer Healthcare Inc. | Health Care | Pharmaceuticals | Bull | NYSE | Earnings-recovery, Integration, Inventory, Margins, OTC, supply chain, valuation | Login |
| Jul 11, 2025 | Fund Letters | Bradford Evans | GTES | Gates Industrial Corporation plc | Industrials | Industrial Machinery | Bull | New York Stock Exchange | aftermarket, Industrial, Margins, Pricing, tariffs | Login |
| Jul 11, 2025 | Fund Letters | Bradford Evans | SIMO | Silicon Motion Technology Corp. | Information Technology | Semiconductors | Bull | NASDAQ | hyperscalers, Margins, Revaluation, semiconductors, Storage | Login |
| Jul 11, 2025 | Fund Letters | Bradford Evans | NVST | Envista Holdings Corporation | Health Care | Health Care Equipment | Bull | New York Stock Exchange | buybacks, Dental, Margins, tariffs, valuation | Login |
| Jan 12, 2026 | Fund Letters | Will Nasgovitz | ITGR | Integer Holdings Corporation | Health Care | Health Care Equipment | Bull | New York Stock Exchange | buybacks, Execution, Margins, Medicaldevices, recovery | Login |
| Jan 12, 2026 | Fund Letters | Will Nasgovitz | CMCO | Columbus McKinnon Corporation | Industrials | Industrial Machinery | Bull | NASDAQ | acquisition, Insiders, Integration, leverage, Margins | Login |
| Jan 12, 2026 | Fund Letters | Will Nasgovitz | ALEX | Alexander & Baldwin, Inc. | Real Estate | Diversified REITs | Bull | New York Stock Exchange | Balance_Sheet, Patience, realestate, Takeprivate, valuation | Login |
| Jan 12, 2026 | Fund Letters | Bradford Evans | LAMR | Lamar Advertising Company | Real Estate | Specialized REITs | Bull | New York Stock Exchange | advertising, buybacks, dividends, Elections, REITs | Login |
| Jan 12, 2026 | Fund Letters | Bradford Evans | WCC | WESCO International, Inc. | Industrials | Trading Companies & Distributors | Bull | New York Stock Exchange | Automation, Distribution, Margins, recovery, valuation | Login |
| Jan 12, 2026 | Fund Letters | Bradford Evans | BLDR | Builders FirstSource, Inc. | Industrials | Building Products Distribution | Bull | New York Stock Exchange | buybacks, Cyclicality, Housing, Insiders, recovery | Login |
| Oct 9, 2025 | Fund Letters | Bradford Evans | BRC | Brady Corporation | Industrials | Electronic Equipment, Instruments & Components | Bull | NYSE | buybacks, Consumables, data centers, dividends, Identification, margin expansion, Tuck-ins | Login |
| Oct 9, 2025 | Fund Letters | Bradford Evans | PHIN | Phinia Inc. | Consumer Discretionary | Auto Parts & Equipment | Bull | NYSE | aftermarket, Auto parts, buybacks, cost savings, deleveraging, oligopoly, rerating | Login |
| Oct 9, 2025 | Fund Letters | Bradford Evans | MTRN | Materion Corporation | Materials | Specialty Chemicals | Bull | NYSE | Capacity, divestiture, EBITDA, guidance, Margins, recovery, semiconductors | Login |
| TICKER | COMMENTARY |
|---|---|
| BLDR | BLDR declined 28% in 2025 amidst weakness in the housing market and as new home starts pressured sentiment. Fundamentally, the Company performed well despite these headwinds and should generate a significant amount of free cash flow in 2025 ($800MM-$1BB). This translates to a trailing yield of 7-9%. If we owned this business privately, we would be pleased to collect a 7-9% yield in a weak year with the promise of significantly higher cashflows when housing starts pickup. BLDR is a manufacturer and supplier of building materials with a focus on residential construction. Our long-term thesis remains intact as there is a structural shortage of housing in the USA. The company has sustained higher gross margins as they have gained scale. I estimate normalized free-cash-flow per share to be $9-$14 per year implying a free-cash-flow yield of 9-14% with no growth priced in. |
| LAMR | One of the top contributors to our Strategy's performance in the quarter, for instance, was Lamar Advertising (LAMR), the nation's leading out-of-home advertising company. LAMR, which operates as a real estate investment trust, had been underperforming for much of the year. It recently provided a solid Q3 report and very favorable outlook causing the stock to rally. LAMR is one of these companies, as the company has been active on its buyback program and increased its dividend this year. LAMR's pacings have been strong, which should lead to positive earnings growth in 2026. Even better, 2026 brings with it the mid-term election cycle, which should boost political advertising spending on Lamar's properties. Still, the stock trades at a reasonable valuation of around 15 times 2026 Enterprise Value/EBITDA. |
| WCC | Electrical products distributor WESCO International outperformed in Q4 after reporting solid Q3 results and raising 2025 guidance. Better-than-expected organic growth was driven by its rapidly expanding data center business, which reached nearly 20% of total revenue. |
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