Heartland Advisors, an investment management firm, has released its 3rd Quarter 2022 Investor Letter for the Heartland Mid-Cap Value Fund. A copy of the same can be downloaded here. In the third quarter, the Russell Mid Cap Value Index returned -4.93% compared to -5.06% for the Mid Cap Value Investor Class and -5.03% for the Mid Cap Value Institutional Class. Initially, the Fund lagged the benchmark Russell Mid Cap Value Index in the third quarter. However, at the end of the third quarter, the fund was able to close the gap to its benchmark his index and outperformed year-to-date. Security selection contributed to the fund’s performance during the quarter. Financials and Utilities outperformed, while Consumer Discretionary, Consumer Staples, and Energy all underperformed. Plus, check out the fund’s top 5 holdings to discover our best picks for 2022.
In its third quarter investor letter, Heartland Advisors discussed stocks such as Advance Auto Parts, Inc. (NYSE:AAP). Advance Auto Parts, Inc. (NYSE:AAP), based in Raleigh, North Carolina, is a provider of automotive replacement parts and accessories. On October 12, 2022, Advance Auto Parts, Inc. (NYSE: AAP) stock closed at $169.32 per share. Advance Auto Parts, Inc.’s (NYSE: AAP) one-month return was his 1.01%, and the company’s stock has lost 21.20% in value over the past 52 weeks. Advance Auto Parts, Inc. (NYSE:AAP) has a market capitalization of $10,179 million.
Here’s what Heartland Advisors specifically said about Advance Auto Parts (NYSE:AAP) in its Q3 2022 investor letter:
“We also saw an opportunity to add to an existing position. Advance Auto Parts Co., Ltd. (NYSE:AAP) as the stock price fell and the risk/reward profile improved. Advance underperformed early in the quarter as peers in lower quality sectors rebounded significantly. In August, the stock fell further after the company reported disappointing second-quarter results as same-store sales fell short of expectations. In addition, management has lowered its full-year earnings guidance by up to 4%, citing softening consumer buying patterns in AAP’s do-it-yourself business.
The most important driver of Advance Auto’s profitability appears to be management’s ability to improve earnings growth. However, the market continues to be shortsightedly focused on sales growth. Opportunities for margin enhancement arise from the integration of overly complex and inefficient distribution networks. Management is planning to roll out a new distribution center. Improve the customer experience by reducing costs, increasing network productivity, and increasing inventory availability.
Additionally, the auto parts retail industry tends to be less cyclical than the consumer discretionary sector. This is because consumers often hold on to used vehicles longer and make necessary repairs rather than buying new vehicles when their financial prospects deteriorate. AAP currently trades at less than 12x his future earnings, well below the company’s long-term median P/E of 15x, but profitability thanks to self-help efforts There is a lot of room for improvement. ”
Advance Auto Parts, Inc. (NYSE:AAP) isn’t on the list of the 30 most popular hedge funds. Thirty-three hedge fund portfolios held Advanced Auto Parts (NYSE:AAP) at the end of the second quarter, compared with 29 last quarter, according to our database.
We covered Advance Auto Parts, Inc. (NYSE:AAP) in a separate article and shared a list of high-dividend stocks. Additionally, for investor letters from hedge funds and other leading investors, visit the Hedge Fund Investor Letters Q3 2022 page.
Disclosure: None. This article was originally published on Insider Monkey.