Heartland Advisors

Philosophy & Process

Heartland Advisors Value Investing Team ImageHeartland Advisors is steadfast in its belief that independent-minded, value investing is the most effective way to deliver superior long-term results.

A value approach is about conquering investment impulses, overcoming fears when others are panicked, and not giving into greed when things become too easy. Discipline is required as is a willingness to objectively question conventional wisdom. We embrace this philosophy and it serves as a core conviction for our investment process.

Investment Team

Portfolio managers and research analysts work side-by-side to apply a bottom-up approach that combines traditional fundamental analysis and meetings with management, competitors, and end clients of the businesses we consider for investment. Collaboration allows the Investment Team to cross-cover sectors and companies, generate a significant amount of internal research, and challenge investment ideas from multiple perspectives.

Our Team

10 Principles of Value Investing™

Bottom-up, fundamental research is integral to Heartland’s security evaluation and selection. When analyzing companies, the Investment Team is guided by our proprietary, consistent, and time-tested 10 Principles of Value Investing™, the centerpiece of our investment process since the founding of the Firm.

The 10 Principles™ form the core of Heartland’s process for setting valuation targets for individual securities, determining their intrinsic worth, and driving all buy and sell decisions. Both quantitative and qualitative elements help us identify strengths and weaknesses from multiple perspectives.

PrincHeartland Advisors Value Investing Research Visitiple 1: Low Price to Earnings

Stocks with low price-to-earnings ratios historically have outperformed the overall market and provided investors with less downside risk than other equity investment strategies.

Principle 2: Low Price to Cash Flow

Strong cash flows give a company greater financial flexibility. When paired with capable management, it can be the foundation for stronger earnings and higher stock prices.

Principle 3: Low Price to Book Value

When a stock’s price is low in comparison to the company’s book value, sentiment about the company or the sector may be overly negative. Potential downside risk protection makes low price/book value stocks attractive.

Principle 4: Value of the Company

We seek to appraise the true intrinsic value of each company we evaluate. Our goal is to make prudent investments by purchasing stocks when they trade at a significant discount to our estimate of their true value.

Principle 5: Financial Soundness

We prefer companies with limited long-term debt. Low-debt companies have more flexibility during adverse business conditions because they can direct cash to operations rather than interest expenses.

Principle 6: Catalyst for Recognition

We consider consumer, political, environmental, and other impacts and trends to determine whether a company has a specific catalyst that we believe will cause its stock price to rise.

Principle 7: Capable Management and Insider Ownership

We meet with company management teams as part of our assessment of the strength and depth of leadership. We pair this evaluation with information about significant or increasing stock ownership among a company’s officers and directors. Insider ownership aligns leadership’s long-term interests with those of shareholders and can signal management’s personal confidence in the business.

Principle 8: Sound Business Strategy

We seek to understand a company’s business strategy by meeting with its management team. These meetings are designed to give us better insights into the leadership team’s conviction, confidence, outlook, and future plans for the organization.

Principle 9: Positive Earnings Dynamics

Earnings tend to drive stock prices. We prefer companies that recently have demonstrated improved earnings and that have upwardly trending estimates.

Principle 10: Positive Technical Analysis

A stock’s historic and more recent price movements can help determine future changes. We prefer stocks that are trading within a narrow price range following a previous down trend.


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©2023 Heartland Advisors | 790 N. Water Street, Suite 1200, Milwaukee, WI 53202 | Business Office: 414-347-7777 | Financial Professionals: 888-505-5180 | Individual Investors: 800-432-7856

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

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

ALPS Distributors, Inc., is not affiliated with Heartland Advisors.