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Q4 2023 : Portfolio Manager Q&A

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How did the Fund perform in the fourth quarter and 1-year periods compared to the Morningstar Moderate Allocation Category?

For the 3-month period ended December 31, 2023, the Fund returned 13.52%, outperforming the Morningstar Moderate Allocation Category average return of 8.60%. For the year, the Fund’s return of 34.44% surpassed the category’s average 13.78% return by over 2,000 basis points.

In fact, the Fund ranked in the top 1% in the category for 2023 and ranked in the top decile (10% or better) for the 5 and 10-year periods as of December 31, 2023.

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


Source: Morningstar as of 12/31/23

What drove the Fund’s equity portfolio performance relative to the S&P 500 Index in 2023?

With respect to the Fund’s equity portfolio, the Fund’s 2023 outperformance relative to the S&P 500 was driven primarily by stock selection. The two largest contributing sectors were Information Technology (IT) and Industrials.

IT: The Fund’s IT holdings gained 88% compared to the Index’s sector holdings which gained 61%. The Fund’s three biggest positive contributors in this sector were CrowdStrike Holdings (CRWD), Advanced Micro Devices (AMD), and Splunk Inc. (SPLK). CrowdStrike (+142%) is a cybersecurity company that provides cloud-based solutions for endpoint security, threat intelligence, and cyberattack response. AMD (+128%) designs and develops semiconductor processors for PCs, gaming consoles and servers. Splunk (+68%) is a cloud-based software company that provides security, compliance, and analytics.

Industrials: The Fund’s Industrials companies rose 91% while the Index’s Industrials companies rose 18%. Two of the Fund’s biggest positive contributors were Uber Technologies Inc. (UBER) and Lyft Inc. (LYFT). Uber (+149%) provides ride-sharing and delivery services through its mobile app platform. Lyft (+36%) is the second-largest ride-sharing company in the U.S. and Canada, and also offers bike- and scooter-sharing services.

How was the Fund’s portfolio allocated between equities and fixed income as of December 31, 2023?

At year-end, the Fund held 65% in equities and 35% in fixed income and cash. Within the Fund’s fixed income allocation, the portfolio includes primarily investment grade securities (rated AAA through BBB). Approximately 98% of the Fund’s debt securities were rated investment grade as of December 31, 2023.

What differentiates the Value Line Capital Appreciation Fund from other allocation funds?

Within the equity portfolio, the Fund typically has an emphasis on growth companies. Among the Fund’s peers in the Morningstar Moderate Allocation Category, less than 30% have a primarily growth investing style for their equity portfolios.

We strive to own a portfolio of companies that can collectively grow their future sales and earnings at faster rates relative to the S&P 500 Index, as we believe that sales and earnings growth drive share price appreciation over time. As of December 31, 2023, the Fund’s equity portfolio had a 3-year projected average annual sales growth rate that was 2X the rate of the S&P 500. The Fund’s equity portfolio had a 3- to 5-year estimated forward earnings growth rate that was 1.5X the rate of 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 12/31/23, the Fund’s Top 10 Holdings were as follows: Meta Platforms Inc Class A (2.88%), Alphabet Inc Class A (2.71%), Uber Technologies Inc (2.71%), NVIDIA Corp (2.63%), Microsoft Corp (2.29%), Amazon.com Inc (2.27%), Visa Inc Class A (1.65%), Apple Inc (1.61%), Booking Holdings Inc (1.60%), Exelixis Inc (1.52%)

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 / 523 funds; 5 Year / 5 stars / 493 funds; 10 Year / 5 stars / 395 funds; ) VALLX (3 Year / 1 stars / 1115 funds; 5 Year / 1 stars / 1040 funds; 10 Year / 2 stars / 811 funds; ) VLEOX (3 Year / 5 stars / 559 funds; 5 Year / 5 stars / 527 funds; 10 Year / 5 stars / 405 funds; ) VALSX (3 Year / 5 stars / 1115 funds; 5 Year / 3 stars / 1040 funds; 10 Year / 3 stars / 811 funds; ) VLAAX (3 Year / 5 stars / 695 funds; 5 Year / 4 stars / 655 funds; 10 Year / 5 stars / 487 funds; ) VALIX (3 Year / 1 stars / 695 funds; 5 Year / 3 stars / 655 funds; 10 Year / 4 stars / 487 funds; ) VAGIX (3 Year / 2 stars / 426 funds; 5 Year / 2 stars / 386 funds; 10 Year / 2 stars / 275 funds; )

Source: Morningstar Direct