Heartland Advisors, an funding administration firm, launched its second-quarter 2026 investor letter for “Heartland Worth Fund”. A replica of the letter will be downloaded right here. The AI development continues to drive the market within the quarter. Small-cap shares proceed to outperform, with the Russell 2000® Index rising 21.49% within the quarter. The Heartland Worth Fund gained 17.05% within the quarter, in contrast with the 17.19% return for the Russell 2000® Worth Index. As well as, you may verify the Fund’s prime 5 holdings to find out its finest picks for 2026.
In its Q2 2026 investor letter, Heartland Worth Fund highlighted I3 Verticals, Inc. (NASDAQ:IIIV). I3 Verticals, Inc. (NASDAQ:IIIV) is an enterprise software program and providers options supplier to public sector entities. On July 14, 2026, I3 Verticals, Inc. (NASDAQ:IIIV) closed at $20.87 per share. One-month return of I3 Verticals, Inc. (NASDAQ:IIIV) was 4.56%, and its shares misplaced 27.51% over the previous 52 weeks. I3 Verticals, Inc. (NASDAQ:IIIV) has a market capitalization of $582.93 million.
Heartland Worth Fund said the next concerning I3 Verticals, Inc. (NASDAQ:IIIV) in its Q2 2026 investor replace:
“Whereas the herd mentality initially drove up PLAB shares on AI hopes, different corporations have been overly punished by disruption fears. Working example: I3 Verticals, Inc. (NASDAQ:IIIV), which makes enterprise software program for the general public sector, together with college cost programs.
The shares slumped from round $34 final fall to under $20 in Might over considerations that rising automation and machine studying applied sciences are disrupting software program shares. In our view, these AI applied sciences usually tend to be a profit than a drawback. The corporate has distinct benefits in information, area experience, and technical information in a public sector setting that is sluggish to undertake new expertise. This dynamic creates a deeply embedded platform and safe relationships that i3 manages for buyer workflows. In actual fact, administration just lately said that prospects will seemingly transfer at a slower tempo for synthetic intelligence adoption than IIIV is able to delivering. In the meantime, IIIV can ship price financial savings capabilities by way of its software program that price range strained public establishments have to do extra with much less.
We imagine earnings per share ought to speed up as latest investments in new purposes roll out to prospects and administration executes on inner price financial savings initiatives by way of automation. Furthermore, IIIV’s constant outlook for recurring income progress, margin growth, and free-cash-flow technology makes it engaging to a possible strategic acquirer, which might be a powerful risk in coming years if the market fails to totally worth shares. But the inventory value is simply 10.3X fiscal 12 months 2026 EBITDA, which represents a steep low cost to its largest peer, which trades at 17.1X regardless of related progress and margins. One other instance of us splitting from the herd is in Utilities. The sector was one in every of our detractors when it got here to safety choice throughout the quarter. However many of those corporations have been oblique beneficiaries of the AI infrastructure buildout and have seen their valuations climb. In our opinion, it doesn’t make sense to tackle AI associated dangers on this a part of the market particularly given present Utility valuations.”
