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Wasatch Small Cap Value Strategy

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Wasatch Small Cap Value Strategy
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Strategy Overview

Highlights
  • Seeks to exploit the inefficiency when a growth stock becomes a value stock
  • Goal is to capture multiple expansion and earnings growth
  • Blend of fallen angels, undiscovered gems, and quality value holdings
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:

  • Fallen Angels: growth companies that have suffered a temporary setback
  • Undiscovered Gems: growth companies trading at value prices
  • Quality Value: statistically cheap, slower growing companies

Primarily invests in U.S. companies with market caps of less than $5 billion at the time of purchase

Approximately 45-65 positions

Portfolio Managers
Austin Bone Austin Bone Lead Portfolio Manager
4 years on strategy
8 years at wasatch
Jim Larkins Jim Larkins Portfolio Manager
25 years on strategy
28 years at wasatch
29 Cumulative PM years on strategy

There’s an inefficiency that exists when a growth stock becomes a value stock, and we try to exploit this inefficiency.”

—Jim Larkins, Portfolio Manager

Performance

Total Returns AS OF 03/31/24 AS OF 05/31/24
Quarter-End Month-end
1 Month
3 Month
ytd
1 yr
3 yr
5 yr
10 yr
Since
Inception
Small Cap Value Composite (Gross)
7.23%
1.88%
6.15%
39.61%
5.22%
13.07%
10.75%
13.46%
Small Cap Value Composite (Net)
7.18%
1.67%
5.79%
38.30%
4.48%
12.26%
9.89%
12.35%
Russell 2000® Value Index
4.68%
2.30%
0.85%
21.76%
-0.17%
8.77%
6.87%
7.87%
Russell 2000® Index
5.02%
1.12%
2.68%
20.12%
-1.65%
8.61%
7.66%
7.48%

Returns for periods greater than one year are annualized. Since inception performance is calculated from 12/31/1997.

Calendar Year Returns (%) NET OF FEES (AS OF 12/31/23)
Small Cap Value Composite
Russell 2000® Value Index
Russell 2000® 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®). GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of content contained herein. To receive a complete list and description of composites and pooled funds and/or a GIPS Composite Report, e-mail inforequest@wasatchglobal.com. The U.S. Dollar is the currency used to express performance.

The Small Cap Value Composite contains fully discretionary equity accounts following the Small Cap Value style.  The composite primarily invests in small companies with the goal of long-term growth of capital.  Income is a secondary objective, but only when consistent with long-term growth of capital.  For comparison purposes the composite is measured against the Russell 2000 Value TR and the Russell 2000 TR indices.

The Russell 2000 Value TR Index measures the performance of Russell 2000 Index companies with lower price-to-book ratios and lower forecasted growth values.

The Russell 2000 TR Index represents the smallest 2,000 companies in the Russell 3000 Index, ranked by total market capitalization.

The Fund has been developed solely by Wasatch Global Investors. The Fund is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the Russell Indices vest in the relevant LSE Group company which owns the Index. Russell ® is a trademark of the relevant LSE Group company and used by any other LSE Group company under license. TMX® is a trademark of TSX, Inc. and used by the LSE Group under license. The Index is 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 Wasatch Core Growth Fund or the suitability of the Index for the purpose to which it is being put by Wasatch Global Investors. Indexes are unmanaged, and investors cannot invest directly in an index.

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Portfolio

Characteristics AS OF 03/31/24
Portfolio
Index
Number of Holdings
59
1419
Average Market Cap
($ Weighted)
$4.59B
$3.03B
Median Market Cap
$3.80B
$842M
EPS Growth (%, est. 5 yr)
11
10
P/E (Forward)
16
13
Portfolio Turnover (%)
63.65
N/A
Active Share (%)
96
N/A
Performance Statistics AS OF 03/31/24
5 yr
Alpha
4.47
Beta
1.02
R-Squared
0.93
Standard Deviation
26.30
Upside Capture
116.11
Downside Capture
97.65
Top 10 Holdings AS OF 03/31/24
Company
% of Net Assets
Kadant Inc.
3.1%
Ensign Group Inc/The
2.9%
Valvoline Inc.
2.7%
National Storage Affiliates Trust
2.7%
Pinnacle Financial Partners Inc.
2.7%
Innospec, Inc.
2.6%
Skyline Champion Corp.
2.5%
Magnolia Oil & Gas Corp
2.5%
Bank OZK
2.5%
Allison Transmission Holdings Inc.
2.4%
59 Number of holdings
96% Active share
Sector Allocation AS OF 03/31/24
Sector
Portfolio
Index
Financials
25.6 %
25.8 %
Consumer Discretionary
19.1 %
11.1 %
Industrials
17.5 %
14.9 %
Information Technology
12.3 %
5.9 %
Health Care
10.0 %
9.4 %
Energy
6.8 %
10.0 %
Materials
3.8 %
5.0 %
Real Estate
2.7 %
9.7 %
Consumer Staples
1.5 %
2.2 %
Cash & Cash Equivalents*
0.7 %
N/A
Utilities
0.0 %
3.7 %
Communication Services
0.0 %
2.3 %
Country Allocation AS OF 03/31/24
Portfolio (%)
Developed
99.3%
United States
97.4%
Israel
1.9%
97.4% United States

Country weights are calculated as a percentage of total portfolio including cash & cash equivalents.

Commentary & Literature

News & Updates

Is It Time for a Changing of The Guard?

March 28, 2024

Q: Are markets poised for a new cycle of small-cap leadership? JB…

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Market Scout – “Value” Funds in a Growth Shop

October 6, 2023

The third quarter of 2023 was negative for stocks as investors fretted…

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Important Disclosures

Past performance does not guarantee future results. Performance results are net of transaction costs and reflect the reinvestment of dividend and other earnings. Net performance data was calculated using actual management fees. Actual fees may vary depending on, among other things, the applicable fee schedule and portfolio size. See Wasatch Global Investors Form ADV Part 2A for more information on fee schedules. Some portfolio net-of fees returns may be net of performance-based fees. Current performance may be lower or higher than the performance data quoted.

Portfolio holdings are subject to change. References to individual companies should not be construed as recommendations to buy or sell shares in those companies. Wasatch analysts closely monitor the companies held in the portfolio. If a company’s underlying fundamentals or valuation measures change, Wasatch will reevaluate its position and my sell part or all of its holdings.

Portfolio Characteristics, Allocations and Top Ten Holdings are derived from a representative account. A representative account is selected based on accounts with substantially similar investment policies, objectives, and strategies that closely resemble, or are most representative of, the strategy it represents.

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.

Wasatch Advisors LP, trading as Wasatch Global Investors ARBN 605 031 909, is regulated by the U.S. Securities and Exchange Commission under U.S. laws which differ from Australian laws. Wasatch Global Investors is exempt from the requirement to hold an Australian financial services licence in accordance with class order 03/1100 in respect of the provision of financial services to wholesale clients in Australia.

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