Value Investing Process

Independent Thinking

At first, “contrarian investing” may sound too different, but we believe it’s the best way to build long-term wealth and is the heart of our "bargain hunting" process.

Some investors follow the crowd and make investments based on market sentiment. A contrarian believes this behavior among investors can lead to mispricings in securities' markets that can be exploited to create wealth. Our goal is to exploit market sentiment, either positive or negative, and use it as an attractive entry point when a stock valuation is depressed or an exit point when a company's fundamentals do not support a lofty valuation.

Research, evaluation, and an eye on building long-term wealth

Heartland Funds’ long-term success through bear and bull markets is the direct result of our managers’ consistent and disciplined application of our proven process based on our value investing philosophy.

Stocks we consider

Before a stock is added to our portfolio, it is closely scrutinized and evaluated. We use a number of criteria to remove less desirable stocks while retaining those with raw value and those which sell at a fraction of their intrinsic worth. Ultimately, each company must meet our criteria and support our goal of long-term capital appreciation.

These companies generally trade at the low end of their:

• Price/earnings
• Price/book value
• Price/cash flow ranges

Their leaders should:

• Have a compelling vision for the growth of the company.
• Demonstrate commitment through high insider stock ownership.
• Possess management skills to lead the company and a record of success. 

As a stock it must:

• Be priced at a fraction of its intrinsic value.
• Have a clear catalyst that will attract additional investors.
• Have a sound balance sheet with low debt relative to its equity.

Making the decision to buy

We buy after our analysts conduct a due diligence process that includes:

• Analyzing the company’s management by asking the tough questions about their business model, financial profile and future goals.
• Reviewing of analyst conference call transcripts and corporate presentations.
• Examining the history of stock ownership by company management – are they buying or are they selling?
• Conducting first-hand research to gain an in-depth understanding of what that company is doing right, doing poorly or not doing at all.

We take a team approach when evaluating a stock. Our portfolio managers and analysts bring their expertise to the table, and we totally engage that talent as we review the stock according to our 10 Principles of Value Investing™. This stock selection process is designed to manage downside risk while capturing upside potential.

What happens after we buy a stock?

Once a stock is part of the portfolio, it is continually monitored to ensure it is on track to generate the results we anticipated.

When do we sell?

We may sell if:

• Valuation targets are achieved.
• There is a change in investment thesis.
• There is a deteriorating financial position.
• If a stock satisfies fewer criteria of the 10 Principles of Value Investing.™

Questions about our investment process? Contact us. We’d be happy to answer your questions.