Past performance does not guarantee future results. Performance represents past performance; current returns may be lower or higher. Performance information for institutional class shares of Funds that existed prior to their initial public offering is based on the performance of investor class shares. The investment return and principal value will fluctuate so that an investor's shares, when redeemed may be worth more or less than the original cost. All returns reflect reinvested dividends and capital gains distributions, but do not reflect the deduction of taxes that an investor would pay on distributions or redemptions. Subject to certain exceptions, shares of a Fund redeemed or exchanged within 10 days of purchase are subject to a 2% redemption fee. Performance does not reflect this fee, which if deducted would reduce an individual's return.
Source: Bloomberg L.P., 12/31/2015 to 12/31/2020 Raw industrials are represented by the Commodities Research Bureau BLS US Spot Index Raw Industrials Subdivision. Past performance does not guarantee future results.
Shares of Phibro were up after reporting better than expected earnings in November. We anticipate the company should continue to see healthy gains in free cash flow generation in 2021, as it begins to reap the benefits of investments made in 2020. Additionally, Phibro has seen growing demand for its products as animal production has rebounded following a slowdown in the meat packing industry due to COVID-19. Despite the favorable outlook for the company, shares trade at 9x estimates of 2021 enterprise value/earnings before interest, depreciation and amortization (EV/EBITDA).
The consensus economic outlook is more optimistic than it has been in the recent past and has resulted in investors excusing shaky fundamentals of individual companies in hopes that a rising tide will lift all boats. The willingness to overlook idiosyncratic challenges is misguided, in our view. While the outlook has improved given the development of COVID-19 vaccines, the speed and degree to which they will translate into sustainable economic growth is still unknown. Instead of a quick end to the global pandemic, we believe the impact of the virus is likely to linger for several quarters, if not years. Additional Government stimulus may offer a temporary reprieve to the immediate effects of cratering production and demand, but we expect the long-term expansion to be tepid. Many investors have interpreted government intervention as a potential safety net providing an opportunity to load up on shares of companies with shaky balance sheets, operating in declining industries or those with questionable capital allocation strategies. We view it as a dangerous precedent that may lead to a sharp reversal in fortunes for overvalued businesses when the government spigot is finally turned off. As such, we are taking a long-term view by investing in businesses that may be well positioned to drive free cash flow growth and those with the financial strength and pricing power necessary to potentially weather the long-term uncertainty caused by the pandemic. We believe this approach can produce a portfolio of companies that should have enduring strength for the long haul. Thank you for the opportunity to manage your capital.
Evans, CFA, is Senior Vice President and Portfolio Manager of the Value Plus Fund and its corresponding separately managed account strategy. He has 24 years of industry experience, 21 at Heartland.
Fleming, CFA, is Vice President and Portfolio Manager of the Value Plus Fund and its corresponding separately managed account strategy. He has 11 years of industry experience, 8 at Heartland.
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Source: FactSet Research Systems Inc., Russell®, and Heartland Advisors, Inc.
The inception date for the Value Plus Fund is 10/26/1993 for the investor class and 5/1/2008 for the institutional class.
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In the prospectus (pdf) dated 5/1/2020, the Gross Fund Operating Expenses for the investor and institutional class of the Value Plus Fund are 1.19% and 0.98%, respectively. The Advisor has voluntarily agreed to waive fees and/or reimburse expenses with respect to the institutional class, to the extent necessary to maintain the institutional class’ “Net Annual Operating Expenses” at a ratio not to exceed 0.99% of average daily net assets. This voluntary waiver/reimbursement may be discontinued at any time. Without such waivers and/or reimbursements, total returns may have been lower.
An investor should consider the Funds’ investment objectives, risks, and charges and expenses carefully before investing or sending money. This and other important information may be found in the prospectus (pdf). To obtain a print prospectus, call 800-432-7856. Please read the prospectus carefully before investing.
As of 12/31/2020, Heartland Advisors on behalf of its clients held approximately 4.39% and 2.19% of the total shares outstanding of B. Riley Financial Inc. and Phibro Animal Health Corp., respectively.
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.
The Value Plus Fund invests in small companies that are generally less liquid and more volatile than large companies. The Fund also invests in a smaller number of stocks (generally 40 to 70) than the average mutual fund. The performance of these holdings generally will increase the volatility of the Fund’s returns.
Value investments are subject to the risk that their intrinsic value may not be recognized by the broad market.
The Value Plus Fund seeks long-term capital appreciation and modest current income.
The above individuals are registered representatives of ALPS Distributors, Inc.
The Heartland Funds are distributed by ALPS Distributors, Inc.
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.
There is no guarantee that a particular investment strategy will be successful.
Sector and Industry classifications are sourced from GICS®.The Global Industry Classification Standard (GICS®) is the exclusive intellectual property of MSCI Inc. (MSCI) and S&P Global Market Intelligence (“S&P”). Neither MSCI, S&P, their affiliates, nor any of their third party providers (“GICS Parties”) makes any representations or warranties, express or implied, with respect to GICS or the results to be obtained by the use thereof, and expressly disclaim all warranties, including warranties of accuracy, completeness, merchantability and fitness for a particular purpose. The GICS Parties shall not have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of such damages.
Heartland Advisors defines market cap ranges by the following indices: micro-cap by the Russell Microcap®, small-cap by the Russell 2000®, mid-cap by the Russell Midcap®, large-cap by the Russell Top 200®.
Because of ongoing market volatility, performance may be subject to substantial short-term changes.
Dividends are not guaranteed and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time.
There is no assurance that dividend-paying stocks will mitigate volatility.
CFA® is a registered trademark owned by the CFA Institute.
Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indices. Russell® is a trademark of the Frank Russell Investment Group.
Data sourced from FactSet: Copyright 2020 FactSet Research Systems Inc., FactSet Fundamentals. All rights reserved.
Bear Market occurs when the price of a group of securities is falling or is expected to fall. Cyclical Stocks cover Basic Materials, Capital Goods, Communications, Consumer Cyclical, Energy, Financial, Technology, and Transportation which tend to react to a variety of market conditions that can send them up or down and often relate to business cycles. Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) measures a company’s financial performance. It is used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions. Free Cash Flow is the amount of cash a company has after expenses, debt service, capital expenditures, and dividends. The higher the free cash flow, the stronger the company’s balance sheet. Return on Equity is a measure of the net income after taxes that a firm is able to earn as a percent of stockholders equity. Russell 2000® Value Index measures the performance of those Russell 2000® companies with lower price/book ratios and lower forecasted growth characteristics. All indices are unmanaged. It is not possible to invest directly in an index.
Heartland’s investing glossary provides definitions for several terms used on this page.