Heartland Advisors, an investment management company, released its “Heartland Value Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. The fund returned 11.7% in the quarter, trailing the 15.3% gains for the Russell 2000 Value Index. The underperformance was attributed to security selection in addition to the strong rally in early cycle sectors where the fund was underweighted. For the full year, the fund returned 17.1% versus 14.7% for the benchmark, stock selection led to the outperformance of the fund in 2023. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Heartland Value Fund featured stocks such as UGI Corporation (NYSE:UGI) in the fourth quarter 2023 investor letter. Headquartered in King of Prussia, Pennsylvania, UGI Corporation (NYSE:UGI) markets and distributes energy products and services. On January 10, 2024, UGI Corporation (NYSE:UGI) stock closed at $24.45 per share. One-month return of UGI Corporation (NYSE:UGI) was 5.07%, and its shares lost 41.01% of their value over the last 52 weeks. UGI Corporation (NYSE:UGI) has a market capitalization of $5.122 billion.
Heartland Value Fund stated the following regarding UGI Corporation (NYSE:UGI) in its fourth quarter 2023 investor letter:
“A good example is UGI Corporation (NYSE:UGI), an energy holding company that operates natural gas pipelines and regulated utilities in Pennsylvania and West Virginia while also distributing propane to residential and commercial customers through its AmeriGas and UGI International subsidiaries.
The overhang on UGI’s stock, which was nearly cut in half from February to October, has been the deteriorating EBITDA contributions from AmeriGas. After rolling up this business over the years, the company decided in 2021 to integrate all the acquisitions from a systems, distribution, and call center perspective. Unfortunately, they dropped the ball on execution, as customer retention was poor due to elevated driver turnover and overall poor service levels.
In late August, UGI announced a strategic review to evaluate all options for the business, which includes sticking with the turnaround plan which has showed two quarters of stabilization. CEO Roger Perreault, who led the initial transformation of AmeriGas, also announced he was stepping down. We think his departure is a positive for this undervalued energy company.
We initiated a position in this company in the fourth quarter as the stock was trading close to book value and just 7.5X earnings, for an earnings yield of 13.3%. By comparison, pipelines trade at over 16X forward earnings and utilities at 20X. Although UGI’s pipeline and propane businesses are more volatile than a traditional regulated utility, a dividend yield of over 6%, in our view, more than compensates.”
A view of the skyline from an electricity pylon, to show the ubiquity of the companies energy products.
UGI Corporation (NYSE:UGI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held UGI Corporation (NYSE:UGI) at the end of third quarter which was 22 in the previous quarter.
We discussed UGI Corporation (NYSE:UGI) in another article and shared the list of best utility stocks to buy according to financial media.. In addition, please check out our hedge fund investor letters Q4 2023 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.
