Heartland Value Fund’s Views on Potbelly Corporation (PBPB)

Heartland Advisors, an investment management company, released its “Heartland Value Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. Small-cap companies started to rebound in the quarter, with the Heartland Value Fund gaining 10.04% compared to a 12.60% return for the Russell 2000® Value Index. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its third-quarter 2025 investor letter, Heartland Value Fund highlighted stocks such as Potbelly Corporation (NASDAQ:PBPB). Potbelly Corporation (NASDAQ:PBPB) owns and operates Potbelly sandwich restaurants. The one-month return of Potbelly Corporation (NASDAQ:PBPB) was 0.35%, and its shares gained 108.42% of their value over the last 52 weeks. On October 10, 2025, Potbelly Corporation (NASDAQ:PBPB) stock closed at $17.07 per share, with a market capitalization of $516.448 million.

Heartland Value Fund stated the following regarding Potbelly Corporation (NASDAQ:PBPB) in its third quarter 2025 investor letter:

“As value investors in a richly priced equity market that’s dominated by passivity and investors’ love affair with AI, we are able, remarkably, to uncover solid businesses priced at attractive valuations. Many are leaders in their respective industries, overlooked by the momentum crowd. Our focus remains on the 10 Principles of Value Investing™, which have stood the test of time. If this can be bolstered by macro tailwinds, all the better. But the investment process starts with fundamentally driven, bottoms-up stock research.

A good example is Potbelly Corporation (NASDAQ:PBPB), the sub sandwich chain which had been a long-term winner for us before it was acquired during the quarter by the convenience store operator RaceTrac at a +32% premium.

We first purchased Potbelly in March 2021, a time when the environment for the restaurant sector was uncertain with depressed sales coming out of COVID-19 lock-downs. It was the fundamentals and strong insider buying that caught our attention. The new CEO at the time, Bob Wright, came out of retirement to turn around a strong brand that had been mismanaged and was no longer growing. He had a long career in restaurants including prior stints as chief operating officer of Wendy’s and as chief executive officer of Charley’s Cheesesteaks. He surrounded himself with an executive team that had successful restaurant careers, many of whom he worked with in prior roles.

The team focused on improving operations through a long list of initiatives. The efforts resulted in consistent same-store growth above restaurant peers and a structural improvement in margins. With operations stabilized, Potbelly is pivoting to growth mode with a target of 2,000 shops from its current footprint of 454. The transformation from a mismanaged restaurant company to a fast growing franchise worth acquiring proved fruitful for investors.”

In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.