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Wasatch Micro Cap Value Strategy

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Wasatch Micro Cap Value Strategy
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Strategy Overview

Highlights
  • Seeks undervalued micro-cap companies with future growth potential
  • Flexible approach allows for multiple expansion and earnings growth
  • Blend of undiscovered growth, value momentum, graduating class and fallen angel micro-cap stocks
Investment Approach

We use a bottom-up approach that seeks to identify undervalued companies with future growth potential. We look for the following types of companies:

  • Undiscovered growth: growth companies with low valuation due to lack of street coverage
  • Value momentum: companies with attractive multiples and accelerating growth
  • Graduating class: maturing micro-cap companies that are entering a period of EPS growth and valuation expansion
  • Fallen angels: growth companies that have suffered a temporary setback

Primarily invests in companies with market caps of less than $1.5 billion at the time of purchase

Portfolio Managers
Brian Bythrow Brian Bythrow Lead Portfolio Manager
16 years on strategy
16 years at wasatch
16 Cumulative PM years on strategy

It’s as if we’re miners. We turn over a lot of stones. Most of them are just rocks, but occasionally we find gold.”

—Brian Bythrow, Lead Portfolio Manager

Performance

Average Annual Total Returns AS OF 09/30/19 AS OF 11/30/19
Quarter-End Month-end
1 Month
3 Month
ytd
1 yr
3 yr
5 yr
10 yr
Since
Inception
Micro Cap Value Composite (Gross)
4.47%
5.84%
27.01%
17.19%
15.83%
14.84%
15.48%
14.46%
Micro Cap Value Composite (Net)
4.33%
5.49%
25.40%
15.57%
14.18%
13.10%
13.52%
12.31%
Russell Microcap® Index
4.64%
9.78%
15.83%
1.87%
6.00%
6.45%
11.50%
7.51%

Returns for periods less than one year are not annualized. Since inception performance is calculated from 07/31/2003.

Calendar Year Returns (%) NET OF FEES (AS OF 12/31/18)
Micro Cap Value Composite
Russell Microcap® Index

Performance is preliminary and subject to change. Past performance is not indicative of future results. Wasatch Global Investors is an independent registered investment advisor. Registration does not imply a certain level of skill or training. Wasatch claims compliance with the Global Investment Performance Standards (GIPS®). To receive a complete list of composite descriptions of Wasatch composites and/or a GIPS-compliant presentation, e-mail inforequest@wasatchglobal.com. The U.S. Dollar is the currency used to express performance.

The Micro Cap Value Composite contains fully discretionary equity accounts following the Micro Cap Value style.  The composite primarily invests in micro cap companies with the goal of long-term growth of capital.  For comparison purposes the composite is measured against the Russell Microcap and Russell 2000 indices.

The Russell Microcap Index is an unmanaged total return index of the smallest 1,000 securities in the small cap Russell 2000 Index and the next smallest 1,000 companies based on a ranking of U.S. equities by market capitalization.

All rights in the Russell Indexes vest in the relevant London Stock Exchange Group plc (collectively, the “LSE Group”), which owns these indexes. Russell® is a trademark(s) of the relevant LSE Group company and is used by any other LSE Group company under license. These indexes are calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Fund or Separate Account. The LSE Group makes no claim, prediction, warranty or representation either as to the results to be obtained from the Fund or Separate Account or the suitability of these indexes for the purpose to which they are being put by Wasatch Global Investors.

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Portfolio

Characteristics AS OF 09/30/19
Portfolio
Index
Number of Holdings
98
1476
Average Market Cap
($ Weighted)
$922 m
$494 m
Median Market Cap
$592 m
$217 m
EPS Growth (%, est. 5 yr)
21%
15%
P/E (Forward)
19
13
Portfolio Turnover (%)
65.58
n/a
Active Share (%)
97
n/a
Performance Statistics AS OF 09/30/19
5 yr
Alpha
8.22
Beta
0.69
R-Squared
0.83
Standard Deviation
12.85
Upside Capture
76
Downside Capture
60
Top 10 Holdings AS OF 09/30/19
Company
% of Net Assets
Skyline Champion Corp.
2.5%
Esquire Financial Holdings Inc.
1.9%
Freshpet Inc.
1.9%
Fabrinet
1.7%
Arbor Realty Trust Inc.
1.7%
Kornit Digital Ltd. (Israel)
1.5%
Construction Partners Inc.
1.4%
NV5 Global Inc.
1.4%
LGI Homes Inc.
1.3%
I3 Verticals Inc.
1.3%
98 Number of holdings
97% Active share
Sector Allocation AS OF 09/30/19
Sector
Portfolio
Index
Information Technology
28.7
10.9
Industrials
16.7
11.7
Financials
15.4
25.1
Health Care
15.2
23.0
Consumer Discretionary
7.6
9.6
Cash & Cash Equivalents*
5.7
0.0
Energy
3.7
4.8
Consumer Staples
3.0
2.2
Communication Services
1.9
3.2
Real Estate
1.1
4.9
Utilities
0.9
1.7
Materials
0.0
2.8
Country Allocation AS OF 09/30/19
Portfolio (%)
Developed
93.3
United States
72.8
United Kingdom
4.7
Japan
4.7
Germany
3.9
Canada
2.3
France
2.1
Israel
1.6
Other
1.2
Emerging & Frontier
6.7
India
1.2
Greece
1.2
Egypt
1.1
Taiwan
0.9
Argentina
0.9
South Korea
0.8
Mexico
0.7
72.7% United States

Commentary & Literature

News & Updates

Wasatch Advisors Rebrands as Wasatch Global Investors

September 24, 2019

Salt Lake City, Utah, September 24, 2019—Independent investment manager Wasatch Advisors has…

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Important Disclosures

Portfolio Characteristics, Allocations and Top Ten Holdings are derived from a representative account.

Est. 5-year EPS Growth %: Estimated percentage increase in earnings per share (EPS) per year of the fund's holdings over the next 5 years. Returns are not guaranteed and may be higher or lower. Source: Wasatch and FactSet. P/E Ratio (forward and trailing): Sum of stock prices of the fund's holdings divided by the aggregate earnings per share of those holdings for the next 12 months (forward), or past 12 months (trailing), calculated as a weighted harmonic average. P/E to Growth Rate: Forward 12-month P/E ratio divided by the estimated 5-year EPS growth rate. Portfolios with a number less than 1.0 would be considered undervalued, around 1.0 would be considered fair valued and significantly greater than 1.0 would be considered overvalued. Weighted Average Market Cap: Average market capitalization of companies held by the fund, weighted by their percentage of fund net assets. Portfolio Turnover: A measure of trading activity in a fund's portfolio over the past 12 months expressed as a percentage of the fund's average total assets. Alpha measures a fund's risk/reward potential. A positive alpha means the fund outperformed the index. A negative alpha means the fund underperformed the index. Beta measures a fund's risk in relation to the market. A beta of 0.8 means the fund's total return is likely to move up or down 80% of the market change; 1.25 means total return is likely to move up or down 25% more than the market. R-Squared measures (from 0 to 1.0) how closely a fund's movements are correlated with movements of its benchmark. An R-squared of 1.0 would mean that the fund's movements are completely correlated with the movements of its benchmark. Active Share measures the difference between portfolio holdings and the benchmark. It is the sum of the absolute values of the different weightings of each holding in the fund versus each holding in the benchmark, divided by 2. Standard Deviation measures the degree to which a fund's performance has varied from its average performance over a particular time period. The greater the standard deviation, the greater a fund's volatility (risk). Upside Capture explains how well a fund performs in time periods where the benchmark's returns are greater than zero. Downside Capture explains how well a fund performs in time periods where the benchmark's returns are less than zero.

Portfolio holdings are subject to risks and may change at any time.

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