Digging Deeper With Each New High


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Bill Nasgovitz

Nasgovitz is Chairman and Portfolio Manager of the Value Fund and its corresponding separately managed account strategy. He also is President and Director of Heartland Funds. He has 49 years of industry experience, 35 at Heartland.


Recently a friend asked, “Bill, with the market making all-time highs almost on a daily basis, I’ll bet it’s difficult to find value.”
Well, it depends. If you're looking at the market indices, the market leaders, today’s darlings, which are priced for perfection—to us that represents high risk with little reward.
We’re amazed to be able to uncover—through thorough, discipline research—terrific businesses at remarkably low valuations.
Here’s an example: Centerra Gold. 
Centerra is an international producer of gold, a low-cost producer, and we've been accumulating shares because of its history of success and valuation.
The company has achieved:
  • record sales, over $1 billion,
  • record output,
  • record reserves,
  • a good balance sheet, and
  • we believe, in our research, record earnings this year, which could be as high as $1.
Centerra, as you can see, is down from its highs, well into the 20s. So, it's pretty washed out. We like that risk/reward ratio, low valuation, low interest, washed out stock. We think it's going to surprise on the upside.
Centarra Gold Stock Price

Heartland Advisors Value Investing Market Insight Centerra Gold Chart
Source: Bloomberg L.P., 11/13/2007 to 11/13/2017.
Past performance does not guarantee future results.

Here’s another. Technology has been a hot sector, but how does a value investor, who traditionally is risk-averse, participate in this growing sector?
Well, we've been accumulating shares of an electronic assembler, a company that serves some of the leading technology companies worldwide. You’d recognize their names. They make parts and put them together for these larger companies.
Sales over the past five years have more than doubled, yet the stock receives little investor interest. Solid balance sheet, lots of cash, big buyback, yet it trades for 10x earnings. If you net out the cash, it’s closer to 9x earnings, 9x times earnings for a growing, profitable, solid business—a double-digit earnings yield—tremendously attractive for the long-term value investor.
So those are vivid examples of active value investing at work. 
There is tremendous opportunity out there if people spend the time and energy doing the research to uncover these solid businesses at extremely attractive valuations. That’s what Heartland is all about. 

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Past performance does not guarantee future results.

Investing involves risk, including the potential loss of principal.

There is no guarantee that a particular investment strategy will be successful.

Value investments are subject to the risk that their intrinsic value may not be recognized by the broad market.

The statements and opinions expressed in the articles or appearances are those of the presenter. Any discussion of investments and investment strategies represents the presenters' views as of the date created and are subject to change without notice. The opinions expressed are for general information only and are not intended to provide specific advice or recommendations for any individual. The specific securities discussed, which are intended to illustrate the advisor’s investment style, do not represent all of the securities purchased, sold, or recommended by the advisor for client accounts, and the reader should not assume that an investment in these securities was or would be profitable in the future. Certain security valuations and forward estimates are based on Heartland Advisors’ calculations. Any forecasts may not prove to be true.

Economic predictions are based on estimates and are subject to change.

As of 6/30/2018, Heartland Advisors on behalf of its clients held approximately 1.03% of the total shares outstanding of Centerra Gold Inc. 

Statements regarding securities are not recommendations to buy or sell.

Portfolio holdings are subject to change without notice. Current and future portfolio holdings are subject to risk.

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