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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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Buyside Digest is not affiliated with, and does not endorse, Heartland Mid Cap Value Fund. This analysis is provided for institutional research purposes only and is not investment advice.
"Heartland's mid-cap value fund gained 9.90% but trailed the index's 13.40% return as AI euphoria drove extreme concentration, with top holdings up 1,000-5,000%. The team reduced ON Semiconductor after doubling, added MarketAxess at 8.8X EV/EBITDA despite headwinds, and initiated IFF as a self-help turnaround."
Heartland Mid Cap Value Fund gained 9.90% in Q2 2026, trailing the Russell Midcap Value Index's 13.40% return due to extreme concentration in perceived AI beneficiaries. The two largest index holdings rocketed nearly 5,000% and 1,000% over 12 months, with momentum outperforming free cash flow yield by over 1000 basis points until a sudden late-June rotation. Despite being overweight five of the top 25 contributors at twice benchmark concentration, the Fund underperformed, underscoring how narrow index returns were. The team reduced ON Semiconductor after it doubled to reach price target, built MarketAxess Holdings despite near-term headwinds given compelling 8.8X EV/EBITDA valuation, and added International Flavors and Fragrances as a self-help turnaround at 12.23X versus industry leader at 19.14X. The managers acknowledge AI's profound impact but warn infrastructure suppliers may face boom-bust cycles like historical technology revolutions. They maintain discipline using four-scenario price targets and their 10 Principles, believing valuation disparities remain as wide as they can recall, creating exploitable opportunities among mispriced stocks on both sides of the AI narrative.
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