Heartland Value Plus Fund: Navigating 2025's Close with Discipline and Vision

As we bid farewell to 2025, it’s always a moment of reflection, isn’t it? For those of us invested in the Heartland Value Plus Fund (HRTVX), this past quarter, indeed this whole year, presented its own unique set of challenges and, crucially, opportunities. We're here to take a closer look at how the fund performed and, more importantly, why certain decisions were made as the year drew to a close.

Think back to the final months of 2025. The market, as it often does, kept us on our toes. We were still grappling with persistent, though perhaps moderating, inflation, and the Federal Reserve's stance on interest rates remained a pivotal topic of conversation. While many headlines focused on the broader market's ebb and flow, particularly the large-cap tech darlings, the underlying currents for small and mid-cap value stocks—our bread and butter, really—were definitely shifting. It wasn't always a smooth ride, but that's precisely where a disciplined approach truly shines, don't you think?

At Heartland, our philosophy is pretty straightforward, and honestly, unwavering: we hunt for value. We're talking about rigorously analyzing companies, digging deep into their financials, looking for solid businesses trading below what we believe they're truly worth. This isn't about chasing fads; it's about patient, fundamental research. During Q4, this commitment meant we continued to navigate a somewhat choppy sea for value-oriented investments. While the broader indices might have presented a mixed picture, our focus remained firmly on individual companies. We certainly weren't immune to market sentiment, but our goal, always, is to protect capital and find long-term growth by identifying these hidden gems. Performance-wise, it was a quarter where our conviction in specific undervalued sectors really came into its own, helping us weather some of the wider market volatility, though the journey, as always, had its moments.

So, what did this mean for the portfolio itself? Well, as always, we weren't just sitting idle. Our team was actively engaged in making considered adjustments. We saw opportunities, for instance, in certain corners of the industrial sector, adding to positions in companies that, despite robust underlying fundamentals, seemed unfairly overlooked by the market. We're talking about businesses with strong cash flows and clear competitive advantages, perhaps those benefiting from domestic re-shoring trends or infrastructure spending. Conversely, we judiciously trimmed or exited positions in companies that had either reached our intrinsic value targets or where the investment thesis had, frankly, evolved in a way that no longer aligned with our stringent criteria. It’s a constant process of evaluation, of asking ourselves, 'Is this still the best place for our investors' capital?' For example, a few regional banks, which had faced some headwinds earlier in the year, began showing signs of stabilization and attractive valuations, prompting us to selectively increase our exposure there. It's all about finding that margin of safety, you know?

Looking ahead to 2026, we remain, dare I say, cautiously optimistic. The economic landscape is always shifting, and while there are always unknowns, we believe the conditions for value investing are, in many respects, improving. When interest rates are higher, as they have been, it often makes those future growth projections for speculative stocks less appealing, bringing the focus back to companies with solid present-day earnings and strong balance sheets. This environment, historically, has been fertile ground for the kind of companies we seek out. We are confident that our disciplined, bottom-up approach will continue to uncover compelling opportunities, allowing us to build a robust portfolio designed for long-term outperformance, regardless of what the broader market decides to do next. It's about staying true to our convictions, even when the crowd is looking elsewhere.