Heartland Advisors initiated a position in Bentley Systems, Incorporated (NASDAQ: BSY) during the third quarter of 2026, citing the infrastructure software firm's resilience against broader market declines. The move highlights a strategic divergence, as the firm’s Mid Cap Value Fund fell 4.77% for the period while the S&P 500 rose 2.30%. This performance gap was driven by drags in the Tech and Health Care sectors, yet management maintained its focus on fundamental research and long-term AI infrastructure tailwinds.
The investment thesis rests on Bentley Systems' status as a "vertical software" provider, a category Heartland Advisors distinguishes from administrative software tools that face higher switching risks. Based in Exton, Pennsylvania, Bentley Systems provides engineering software for public works and natural resources. The fund’s letter notes that over 40 years of proprietary data and deep integration have established Bentley Systems as an industry standard for infrastructure modeling. Because its software represents roughly five basis points, or 0.05%, of total project costs for mission-critical infrastructure, customers face significant switching costs.
Heartland Advisors argues that Bentley Systems is heavily discounted by a negative top-down industry narrative despite compelling long-term prospects. The fund points to severe engineering labor challenges faced by customers and the reliance of asset owners on Bentley Systems to ensure reliability while minimizing expenses. With structural underinvestment in global infrastructure creating buoyant end-market demand, the firm expects Bentley Systems' sales and free cash flow to accelerate as customers adopt its offerings for AI-oriented workloads.
Market data reflects the volatility surrounding this position. On October 12, 2026, Bentley Systems closed at $35.15 with a market capitalization of $10.62 billion. The stock had posted a year-to-date pullback of approximately 7.90%, trading within a 52-week range of $28.08 to $52.85. Despite these price fluctuations, the fund views the company's defensible "moat" and opportunity profile as attractive.
The broader market context for the third quarter was marked by faltering AI trade momentum and volatility in interest rates and oil prices. Following double-digit gains in the second quarter, the Russell Midcap Index fell 1.98%, trailing the S&P 500's 2.30% gain. However, projections indicate that nearly $1 trillion in technology AI capital expenditure is expected to boost GDP by 3% and drive earnings growth in 2026.
Investor sentiment toward Bentley Systems has cooled recently according to database records. Thirty-one hedge fund portfolios held the stock at the end of the second quarter, down from 38 in the previous quarter. While Heartland Advisors acknowledges the investment potential of Bentley Systems, it maintains that certain other AI stocks offer greater upside potential with less downside risk.