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A Small-Cap Solution with Lower Risk and Strong Performance

Among small growth funds, performance is only part of the story. Assessing the level of risk to achieve that performance is key.

3 Reasons to Consider the Value Line Small Cap Opportunities Fund


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How does your fund compare to the Small Cap Opportunities Fund?
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Q1 2024 : Portfolio Manager Q&A

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Would you please comment on the Fund’s outperformance relative to the Morningstar Small Growth Funds category average in 1Q and over longer time periods?

For the quarter ended March 31, 2024, the Fund’s return of 8.71% outperformed the Morningstar Small Growth Category average return of 7.49% by over 120 basis points. The Fund has also outperformed the category average over longer time periods. In fact, the Fund’s performance ranked in the top quartile (25% or better) for the 3, 5 and 10- year periods ended March 31, 2024.

We believe the Fund’s outperformance over multiple periods is primarily due to our disciplined investment approach of owning companies with a long-term track record of consistent growth in both stock price and earnings.

Please visit the Fund’s performance page for complete performance information.


Source: Morningstar as of 3/31/24

Would you please describe the types of companies the Fund’s investment process favors?

Our stringent investment criteria lead us to companies with a history of consistent growth in both stock price and earnings over a multi-year period. We seek companies with business models that enjoy more predictable operating results and recurring revenue in a variety of market conditions. These companies could be described as “boring,” as they often play a role in mundane, essential products and services.

Two long-term Fund holdings illustrate this approach:

  • RBC Bearings Inc. (RBC) creates ball bearings and other engine parts that are used in aerospace, construction, mining, transportation, and other industries. The Fund has owned this company for over 20 years.
  • AAON Inc. (AAON) is another long-term holding which has been in the portfolio for over 15 years. AAON provides air conditioning and heating equipment that serves commercial and industrial markets.

Small-cap companies are often associated with a higher degree of risk compared to larger companies. What is your approach to risk management for the Fund?

Typically, small-cap companies are associated with higher risk because they are generally at earlier stages of their business models. However, as a result of our disciplined investment approach, we own companies that have a long-term track record of consistent growth in both stock price and earnings.

With this disciplined approach, the Fund historically has a lower risk profile compared to its category peers. In fact, the Fund has achieved remarkably low risk as measured by standard deviation. In addition, the Fund has been awarded Morningstar’s “Low” Risk Rating for the 3, 5 and 10-year periods ended March 31, 2024.


Source: Morningstar as of 3/31/24


* EULAV Asset Management (the “Adviser”) and EULAV Securities LLC, the Fund’s principal underwriter (the “Distributor”), have agreed to waive certain class-specific fees and/or pay certain class-specific expenses incurred by the Institutional Class so that the Institutional Class bears its class-specific fees and expenses at the same percentage of its average daily net assets as the Investor Class’s class-specific fees and expenses (excluding 12b-1 fees and any extraordinary expenses incurred in different amounts by the classes) (the “Expense Limitation”). The Adviser and the Distributor may subsequently recover from assets attributable to the Institutional Class the reimbursed expenses and/or waived fees (within 3 years after the fiscal year end in which the waiver/reimbursement occurred) to the extent that the Institutional Class’s expense ratio is less than the Expense Limitation or, if lower, the expense limitation in effect when the waiver/reimbursement occurred. The Expense Limitation can be terminated or modified before June 30, 2019 only with the agreement of the Fund’s board. The Fund’s performance would be lower in the absence of such waivers.

As of 03/31/24, the Fund’s Top 10 Holdings were as follows: Comfort Systems USA Inc (4.24%), RLI Corp (3.24%), SPS Commerce Inc (3.20%), AAON Inc (3.04%), CACI International Inc Class A (2.82%), EMCOR Group Inc (2.47%), Federal Signal Corp (2.37%), Woodward Inc (2.37%), RBC Bearings Inc (2.35%), Exponent Inc (2.23%)

There are risks associated with investing in small and mid cap stocks, which tend to be more volatile and less liquid than stocks of large companies, including the risk of price fluctuations.

The performance data quoted herein represents past performance and does not guarantee future results. Market volatility can dramatically impact the fund's short term performance. Current performance may be lower or higher than figures shown. The investment return and principal value will fluctuate so that an investor's shares, when redeemed may be worth more or less than their original cost. Past performance data through the most recent month end is available at vlfunds.com or by calling 800.243.2729.

You should carefully consider investment objectives, risks, charges and expenses of Value Line Funds before investing. This and other information can be found in the fund's prospectus and summary prospectus, which can be obtained free of charge from your investment representative, by calling 800.243.2729, or by clicking on the applicable fund at www.vlfunds.com. Please read it carefully before you invest or send money. Value Line Funds are distributed by EULAV Securities LLC. Past performance is no guarantee of future results.

Portfolio holdings are subject to change and should not be considered a recommendation to buy or sell securities. Current and future portfolio holdings are subject to risk.

The average annual returns shown above are historical and reflect changes in share price, reinvested dividends and are net of expenses. Investment results and the principal value of an investment will vary.

The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three- year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. VLIFX (3 Year / 5 stars / 510 funds; 5 Year / 5 stars / 476 funds; 10 Year / 5 stars / 382 funds; ) VALLX (3 Year / 1 stars / 1100 funds; 5 Year / 1 stars / 1026 funds; 10 Year / 2 stars / 798 funds; ) VLEOX (3 Year / 5 stars / 552 funds; 5 Year / 5 stars / 523 funds; 10 Year / 5 stars / 399 funds; ) VALSX (3 Year / 4 stars / 1100 funds; 5 Year / 2 stars / 1026 funds; 10 Year / 3 stars / 798 funds; ) VLAAX (3 Year / 4 stars / 680 funds; 5 Year / 3 stars / 642 funds; 10 Year / 5 stars / 485 funds; ) VALIX (3 Year / 1 stars / 680 funds; 5 Year / 3 stars / 642 funds; 10 Year / 4 stars / 485 funds; ) VAGIX (3 Year / 2 stars / 426 funds; 5 Year / 2 stars / 382 funds; 10 Year / 2 stars / 270 funds; )

Source: Morningstar Direct