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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Heartland Value Fund delivered 17.05% in Q2 2026, maintaining a contrarian stance against AI euphoria while small caps outperformed. The managers actively trimmed overvalued Technology exposure and added to 51 positions across overlooked sectors at attractive valuations."
Heartland Value Fund returned 17.05% in Q2 2026, slightly trailing the Russell 2000 Value Index's 17.19% return, as small caps outperformed large caps for the third consecutive quarter out of four. The managers take a contrarian stance against the AI-driven market euphoria, noting that margin debt levels are approaching dotcom bubble highs and speculation has reached excessive levels. While acknowledging AI's significance, they believe disruption is overstated and actively trimmed Technology exposure as valuations deteriorated. The team added to 51 existing positions across multiple sectors including Energy, Financials, Healthcare, and Industrials, finding ample opportunities outside AI-focused names. Key holdings include Photronics in semiconductor equipment, i3 Verticals in public sector software, Unitil in traditional utilities, and Sonic Automotive in used car retail. The managers emphasize their disciplined adherence to the 10 Principles of Value Investing, focusing on attractive valuations, strong balance sheets, and positive earnings dynamics. They see continued opportunities for active value investors willing to challenge the herd and identify companies unfairly punished by AI disruption fears.
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