Trusting the Process in an Expensive Market

“A good process produces good results." 
— Nick Saban, Championship winning college football coach
After 18 months of seemingly uninterrupted gains in everything from large growth stocks to crypto currencies and the block-chain-born art known as NFT (non-fungible token), investors would be wise to step back and look at valuations before throwing more money at some of the latest and greatest. We’d suggest a simple one to start—the Buffet indicator.
Named after Warren Buffet, the measure looks at the market value of virtually all publicly traded U.S. businesses relative to the gross domestic product. Recent readings peg the indicator at 240%. Put another way, investors are paying about $2.40 for every $1.00 of goods produced. That is roughly twice the long-time average, and the highest level in the past 70 years.

Investor willingness to pay up for equities has led 10-year annualized returns of the S&P 500 to hit levels not seen since the Dotcom era, as shown below. For those who remember the lost decade that followed the bursting of the tech bubble, the current excesses, in our opinion, are a cause for concern.
Heartland Advisors Value Investing Total Market Cap to GDP Chart
Source: Stifel and Barry Bannister. Monthly data from 1802 to present. Data sourced from 1802-1871:; from 1871 to present: Format Stifel Equity Strategy. Large Cap U.S. Stocks from G. William Schwert; from 1947- present: for CPI inflation “Historical Statistics of the United States, Millennial Edition” (Cambridge Univ. Press) and BEA data. Years 2021-2024 are estimates. Economic predictions are based on estimates and are subject to change. All indices are unmanaged. It is not possible to invest directly in an index.
Past performance does not guarantee future results.
As Investors have rushed into cyclical names and large growth companies, we have had an opportunity to invest in high-quality businesses at historically attractive valuations that are less sensitive to various phases of the business cycle. We believe this is a prudent approach that is counter to the bidding up of businesses that are running on waning stimulus funds.

As we sort through the companies that hit our radar, we continue to follow our time-tested process and try to avoid investments that fit some vague macro-economic view. We remain focused on valuations, balance sheet strength and catalysts that can result in a change in perception by investors. We believe this disciplined application of our playbook will be key to navigating the quarters ahead.

Your Heartland Team


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Past performance does not guarantee future results.

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 Funds' prospectus. To obtain a prospectus, please call 800-432-7856 or visit Please read the prospectus carefully before investing.

Investing involves risk, including the potential loss of principal.

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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 this article are those of the presenter(s). Any discussion of investments and investment strategies represents the presenter’s 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. Any forecasts may not prove to be true. Economic predictions are based on estimates and are subject to change.

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