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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Heartland Value Fund 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Heartland Value Fund)

Primary Source Intelligence • Q3 2026 Letter Analysis

Heartland Value Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Heartland Value Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-6.96%

YTD+16.9%

Annualized+11.53%

Positioning StanceCONSTRUCTIVE

Market CapSmallCap

GeographyUS

Digest Analysis

Quick Take

"Driven by selection headwinds in Industrials, Energy, and Technology, while taking advantage of market dislocations to add to deeply discounted holdings including Academy Sports and Outdoors and Hillman Solutions."

Executive Summary

During the third quarter of 2026, the Heartland Value Fund declined 6.96% net of fees, underperforming the Russell 2000 Value Index decline of 4.91% and the S&P 500 gain of 2.30%. On a year-to-date basis, the Fund remains up 16.90% net of fees, closely tracking the Russell 2000 Value Index return of 16.96% and outpacing the S&P 500 return of 12.75%. Performance was bolstered by positive security selection within Health Care, Materials, and Communication Services, but hindered by negative selection in Energy, Industrials, and Technology alongside an underweight stance in outperforming pure-play refiners. The investment team noted that market attention shifted away from the artificial intelligence trade toward macroeconomic and geopolitical concerns, including rising Treasury yields, elevated energy prices, and interest-rate pressures. Despite short-term benchmark volatility, the managers argue that the broader backdrop for value investing is improving. Small-cap equities trade at a substantial valuation discount to large-cap equities, with the Fund trading at approximately 11x next-twelve-months earnings, representing an attractive 9.0% earnings yield compared to 5.3% for the S&P 500. Portfolio activity centered on derisking positions that experienced sharp appreciation earlier in the year while capitalizing on market overreactions. The Fund added to its position in Academy Sports and Outdoors following peer-induced weakness and initiated a new holding in hardware distributor Hillman Solutions. Additionally, portfolio holding Integer Holdings agreed to be acquired by KKR for $127 per share, marking the seventh holding acquired in 2026.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

65%

CautiousHigh

Moderate (65%)

Heartland demonstrates moderate-to-high conviction by maintaining a disciplined multi-scenario price-targeting system (base, upside, downside, max loss) and naming specific weights such as ASO (2.13%) and ITGR (1.96%). Conviction is tempered by broad diversification across sectors and an awareness that fickle market sentiment can delay fundamental realization.

Growth Outlook

65%

BearishBullish

Bullish (65%)

The team expresses constructive optimism regarding small-cap value fundamentals, noting the 11x forward P/E and 9% earnings yield relative to bonds and large caps. However, this is counterbalanced by acknowledging that near-term macro headwinds, rising rates, and choppy retail traffic create ongoing turbulence.

Risk Appetite

60%

DefensiveAggressive

Balanced (60%)

The managers maintain an equity posture focused on undervalued small-cap businesses while actively derisking holdings that experienced rapid appreciation earlier in the year. Capital was selectively redeployed into out-of-favor companies like ASO and HLMN rather than pursuing aggressive high-beta exposure.

Capital Deployment

60%

De-riskingDeploying

Net Neutral (60%)

Deployment activity reflects balanced rotation: capital was harvested from acquired names like ITGR and appreciated winners, while capital was deployed into additions like ASO and new entries like HLMN.

Forward Guidance

70%

CautiousExpansionary

Expansionary (70%)

Heartland indicates an active bias toward stock-picking and deploying capital into neglected value opportunities as competition for investment dollars grows. The team plans to leverage its 10 Principles of Value Investing to capitalize on favorable risk-versus-reward setups created by benchmark divergence.

Language Signal

65%

BearishBullish

Bullish (65%)

The commentary features predominantly positive value terminology including 'substantial discount', 'sizable valuation advantage', 'favorable environment', and 'validation of our disciplined process'. Balanced against these are recurring notes of caution regarding macro noise, choppy traffic, and unpredictable markets.

Perceived Risk

60%

Low RiskElevated

Moderate Risk (60%)

The managers perceive moderate-to-high macro risks across the investing landscape, citing surging Treasury yields, elevated oil prices, choppy foot traffic, and potential Fed tightening. They mitigate these macro risks by avoiding top-down forecasting and relying on bottom-up margin of safety analysis.

Opportunity Density

75%

ScarceAbundant

Abundant (75%)

The managers view the current market as rich with mispriced small-cap opportunities, citing the widest valuation gap between small and large caps in decades. Strong corporate takeout interest, with seven portfolio companies acquired year-to-date, corroborates high opportunity density.

Time Horizon

65%

Short-TermLong-Term

Multi-Year (65%)

Heartland operates with a patient multi-year time horizon of 2 to 5 years, framing short-term quarterly fluctuations as mere noise relative to normalized business value. Their holdings, such as Hillman and Academy, are expected to compound as organic growth initiatives and end-market recoveries unfold over several cycles.