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Q1 2024 : Portfolio Manager Q&A

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How did the Fund perform relative to the Morningstar Moderate Allocation Category in the first quarter of 2024 and for longer-term periods?

The Fund gained 10.00% in the first quarter of 2024, surpassing the Morningstar Moderate Allocation Category’s average return of 5.32% by over 460 basis points. For the 1-year period, the Fund outperformed by over 1400 basis points, with a return of 29.60% vs. 15.19% for the category average. In fact, the Fund’s 1-year performance ranked in the top 2% among its category peers and ranked in the top 10% or better for the 5 and 10-year periods ended March 31, 2024.

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


Source: Morningstar as of 3/31/24

What factors drove the Fund’s equity performance in 1Q relative to the S&P 500 Index?

During the first quarter, the Fund’s equity performance benefited primarily from stock selection relative to the S&P 500 Index.

The Fund’s two largest contributing sectors to performance were Information Technology (IT) and Financials. The Fund’s IT holdings gain of 32% was more than double the Index’s sector gain of 13%. Within the IT sector, two of the Fund’s best performing companies were MicroStrategy Inc. (MSTR) and Nvidia Corp. (NVDA). MicroStrategy, which gained 170% in the quarter, provides analytics software that enables companies to design intuitive business intelligence reports. The company is using its software capabilities to develop Bitcoin applications and is investing cashflows and financing proceeds into Bitcoin. Nvidia is a leading developer of artificial intelligence graphics processing units. Nvidia gained 82% during the quarter.

In the Financials sector, the Fund benefited from its positions in several companies including Coinbase Global Inc. (COIN, +75%) and Robinhood Markets Inc. (HOOD, +58%). Coinbase is the leading cryptocurrency exchange platform in the U.S. Robinhood Markets provides a financial services platform where users can conduct commission-free investing and trading in stocks, ETFs and cryptocurrency.

Conversely, Health Care was the Fund’s biggest detractor in 1Q. The Fund’s weighting to the sector was similar to the S&P 500, but the Fund’s Health Care companies declined 5% compared to the Index’s 9% gain in the sector.

What was the Fund’s allocation between equities and fixed income as of March 31, 2024?

As of March 31, 2024, the Fund held 67% in equities and 33% in fixed income and cash. The Fund’s fixed income portfolio is comprised primarily of investment grade bonds (rated AAA through BBB). As of March 31, 2024, approximately 99% of the Fund’s debt securities were investment grade rated.

How do the growth characteristics of the Fund’s equity holdings compare to companies in the S&P 500 Index?

We believe that sales and earnings growth are important drivers of share price appreciation over the longer term. Therefore, we strive to own a portfolio of companies that have compelling long-term growth potential and can collectively grow their future sales and earnings at faster rates when compared to the S&P 500. As of March 31, 2024, the Fund’s equity portfolio had a 3-year projected average annual sales growth rate of 16% and a 3- to 5-year estimated annual forward earnings growth rate of 20%. These rates are significantly higher than the expected growth rates for the S&P 500.



*EULAV Asset Management (the “Adviser”) and EULAV Securities LLC, the Fund’s principal underwriter (the “Distributor”), have agreed to permanently 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 from the month 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 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: NVIDIA Corp (3.86%), Meta Platforms Inc Class A (3.43%), MicroStrategy Inc Class A (3.05%), Uber Technologies Inc (2.72%), Amazon.com Inc (2.52%), Alphabet Inc Class A (2.50%), Microsoft Corp (2.38%), Visa Inc Class A (1.64%), Exact Sciences Corp (1.62%), Netflix Inc (1.46%)

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