Heartland Advisors, an investment management company, released its first-quarter 2026 investor letter for “Heartland Value Fund”. A copy of the letter can be downloaded here. At the beginning of the year, small caps outperformed large caps by a wide margin; however, increasing geopolitical risks in March led investors to favor larger-cap companies perceived as safer. The firm is optimistic about the long-term prospects ahead for small value stocks. The Fund appreciated 7.35% in the first quarter compared with the 4.96% return for the Russell 2000® Value Index. Stock selection contributed to the Fund’s outperformance in the quarter and across the past one, three, and five years. In addition, you can check the Fund’s top 5 holdings to determine its best picks for 2026.
In its first-quarter 2026 investor letter, Heartland Value Fund highlighted I3 Verticals, Inc. (NASDAQ:IIIV). I3 Verticals, Inc. (NASDAQ:IIIV) is an enterprise software and services solutions provider to public sector entities. On April 16, 2026, I3 Verticals, Inc. (NASDAQ:IIIV) closed at $21.04 per share. One-month return of I3 Verticals, Inc. (NASDAQ:IIIV) was -5.65%, and its shares lost 16.34% over the past 52 weeks. I3 Verticals, Inc. (NASDAQ:IIIV) has a market capitalization of $652.06 million.
Heartland Value Fund stated the following regarding I3 Verticals, Inc. (NASDAQ:IIIV) in its Q1 2026 investor letter:
“There has been a lot of carnage in the software industry lately, on fears that AI bots will take over the business. I3 Verticals, Inc. (NASDAQ:IIIV) hasn’t been immune.
The company, which makes enterprise software for the public sector, including school payment systems, has been pressured by the broader narrative that AI will upend its software business models. Its shares have slumped to the low thirties last fall and closed the quarter at $22. In our view, this is a case where the market has over generalized the risk. For starters, i3 provides embedded software and payments solutions for niche verticals, such as school cafeteria and tuition payments systems. The retention rate for these types of contracts has historically been very high and switching vendors can be complex. Municipalities and school districts are not in the habit of frequently putting out Requests for Proposals to change systems.
Yet the company’s cash flow characteristics, sticky customer base, and potential for eventual strategic interest do not seem to be fully reflected in current valuations. We believe IIIV is worth 16x EBITDA, which would return the stock to around $32 a share. Even if it were to hit that multiple, though, it would still be trading at a steep discount to its largest peer, which trades at 19x EBITDA…” (Click here to read the full text)
I3 Verticals, Inc. (NASDAQ:IIIV) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 14 hedge fund portfolios held I3 Verticals, Inc. (NASDAQ:IIIV) at the end of the fourth quarter, up from 12 in the previous quarter. In the fourth quarter of 2025, I3 Verticals, Inc.’s (NASDAQ:IIIV) revenue grew just 1% compared to the same quarter last year, while recurring revenue increased over 8% year-over-year. While we acknowledge the risk and potential of I3 Verticals, Inc. (NASDAQ:IIIV) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than I3 Verticals, Inc. (NASDAQ:IIIV) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered I3 Verticals, Inc. (NASDAQ:IIIV) and shared Conestoga Capital Advisors’ views on the company in Q4 2025. In addition, please check out our hedge fund investor letters Q1 2026 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.
