Source: The Federal Reserve. Quarterly data 1/1/1951 to 6/30/2020. This chart shows nonfinancial debt in the United States as a percentage of gross domestic product (GDP). Debt includes debt securities (commercial paper, Treasury securities, agency- and GSE-backed securities, municipal securities, and corporate and foreign bonds) and loans (depository institution loans, other loans and advances, mortgages, and consumer credit). Past performance does not guarantee future results.
COVID-19 is likely to cast a shadow over the global economy for several years. Government stimulus has cushioned some of 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 an “all clear” to load up on shares of companies with shaky balance sheets, operating in declining industries and those with questionable capital allocation strategies. While those types of companies soared during much of this year, we believe it is a short-sighted approach fraught with risk. Instead, we are taking a long-term view by investing in businesses that we believe may be well positioned to drive free cash flow growth and those with the financial strength to potentially weather long-term uncertainty caused by the pandemic. We believe this tactic could produce a portfolio of companies that may come out on the other side of the current environment in a much stronger position. Thank you for the opportunity to manage your capital.
There is no assurance that dividend-paying stocks will mitigate volatility.
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 Investment Group, and Heartland Advisors, Inc. *Performance data is preliminary. Yearly and quarterly returns are not annualized. The Strategy's inception date is 11/30/2007. **Shown as supplemental information. The US Dollar is the currency used to express performance. Returns are presented net of advisory fees and net of bundled fees and include the reinvestment of all income. The returns net of bundled fees were calculated by subtracting the highest applicable sponsor portion of the separately managed wrap account fee from the net of advisor fees return.
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†Composite return is net of advisory fees.
Past performance does not guarantee future results.
The Small Cap Value Plus Strategy primarily invests in companies that have a market capitalization between $250 million and $4 billion, with a majority of its assets invested in companies that pay dividends. The Strategy intends to capture the long-term appreciation of small-caps, while minimizing the volatility of returns inherent in the small-cap market.
The Small Cap Value Plus Strategy invests in small companies selected on a value basis. Such securities generally are more volatile and less liquid than those of larger companies.
Value investments are subject to the risk that their intrinsic value may not be recognized by the broad market.
Heartland Advisors, Inc. (the "Firm") claims compliance with the Global Investment Performance Standards (GIPS®). The Firm is a wholly owned subsidiary of Heartland Holdings, Inc., and is registered with the Securities and Exchange Commission. For a complete list and description of Heartland Advisors composites and/or a presentation that adheres to the GIPS® standards, contact the Institutional Sales Team at Heartland Advisors, Inc. at the address listed below.
Statements regarding securities are not recommendations to buy or sell.
Portfolio holdings are subject to change.
Current and future holdings are subject to risk.
Separately managed accounts and related investment advisory services are provided by Heartland Advisors, Inc., a federally registered investment advisor. ALPS Distributors, Inc., is not affiliated with Heartland Advisors, 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.
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.
Heartland’s investing glossary provides definitions for several terms used on this page.
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.