| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Wasatch Small Cap Growth Strategy underperformed in Q4 2025 and posted its worst annual performance in over 25 years, primarily due to lack of exposure to biotechnology stocks which surged 27%. The strategy's focus on high-quality businesses with proven earnings and strong fundamentals was a headwind as markets favored speculative companies tied to themes like AI, quantum computing, and cryptocurrency. Despite disappointing results, portfolio fundamentals remain solid with ROA and ROE well above benchmark levels. Key detractors included Shift4 Payments, Vital Farms, and Trex, while contributors were JFrog, Fabrinet, and RBC Bearings. The managers are not making knee-jerk reactions and remain disciplined in their quality-focused approach. They believe the strategy is well positioned for when high-quality stocks return to favor, noting that relative valuations are now at their most attractive levels in at least a decade. The team expresses confidence in outperforming over a full market cycle.
Focus on high-quality small cap growth companies with proven earnings track records, high ROAs and ROEs, while avoiding speculative businesses despite recent market preference for low-quality names.
The managers remain confident in their ability to outperform over a full market cycle. They believe the strategy is well positioned for an environment where high-quality stocks return to favor, given solid fundamentals and valuations that now look more attractive relative to the broader small cap universe.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 22 2026 | 2025 Q4 | FN, FOUR, FROG, RBC, TREX, VITL | AI, Biotechnology, growth, healthcare, Quality, small cap, technology, value |
FOUR VITL TREX FROG FN RBC |
The strategy focuses on high-quality businesses with high ROAs and ROEs, and track records of durable earnings growth. Portfolio fundamentals remain solid with ROA and… |
| Oct 20 2025 | 2025 Q3 | BRBR, FN, INSP, MEDP, NVM, SHAK | Artificial Intelligence, Growth Investing, healthcare, semiconductors, small caps | - | The fund underperformed as small-cap volatility and speculative AI stocks distorted relative performance. Managers emphasize high-quality, long-duration growth companies like Medpace and Nova that benefit… |
| Jul 21 2025 | 2025 Q2 | AGYS, BRBR, CWAN, FN, GSHD, NVMI | earnings momentum, free cash flow, growth, Quality, small cap | GSHD | The strategy emphasizes high-quality small-cap growth companies with proven earnings momentum. Short-term headwinds from tariffs and speculative trading masked underlying business strength. Long-term confidence remains… |
| Mar 31 2025 | 2025 Q1 | AGYS, BROS, FRPT, GLOB, ITCI, RBC | - | - | - |
| Dec 31 2024 | 2024 Q4 | BOOT, BRBR, PACS, PCTY, ROAD, TMDX | - | - | - |
| Sep 30 2024 | 2024 Q3 | CWAN, ENSG, FROG, HQY, INSP, MEDP | - | - | - |
| Jun 30 2024 | 2024 Q2 | ADUS, BOOT, FIVE, NVMI, RPD, SITE, SPT, TMDX | - | - | - |
| Apr 15 2024 | 2024 Q1 | AGYS, CWAN, FIVN, HQY, MEDP, NEOG, NVMI, YETI | - | - | - |
| Dec 31 2023 | 2023 Q4 | BRBR, FOXF, MEDP, PCTY, PNFP, XPEL | - | - | - |
| Sep 30 2023 | 2023 Q3 | EEFT, FIVE, HQY, INSP, OLLI, SHAK, SILK, YETI | - | - | - |
| Jun 30 2023 | 2023 Q2 | FFO GR, INSP, MEDP, RBC, SITE, SPT | - | - | - |
| Mar 31 2023 | 2023 Q1 | CYBR, FIVE, GDYN, INSP, MEDP, PCTY | - | - | - |
| Jan 3 2023 | 2022 Q4 | BOOM, CYBR, FIVE, FOXF, GDYN, ISNP, MEDP, PCTY | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIThe extended federal government shutdown added volatility during what was otherwise a risk-on environment, with a mid-quarter shift in market behavior for AI-related equities as the exuberant narrative evolved to one more balanced in assessing the technology's enormous potential against staggering capital spending plans and high expectations. The team initiated a position in Credo Technology as a more diversified way to gain exposure to strong trends in AI-connectivity. |
Connectivity Semiconductors Infrastructure Capital Spending |
QualityThe portfolio has shifted toward higher quality businesses with better profitability, lower leverage, and less volatile earnings. Quality stocks underperformed significantly in 2025, creating attractive entry points for value investors. The manager maintains price discipline while seeking quality companies trading at discounts to intrinsic value. |
Quality Profitability Leverage Earnings | |
TechnologyThe fund added three technology companies that have each halved over 2025 and hopes to add more. Many tech stocks had become expensive but recent falls present opportunities, though most still aren't cheap enough including Xero. |
Software Valuation Opportunity Selloff | |
| 2025 Q3 |
AIThe extended federal government shutdown added volatility during what was otherwise a risk-on environment, with a mid-quarter shift in market behavior for AI-related equities as the exuberant narrative evolved to one more balanced in assessing the technology's enormous potential against staggering capital spending plans and high expectations. The team initiated a position in Credo Technology as a more diversified way to gain exposure to strong trends in AI-connectivity. |
Connectivity Semiconductors Infrastructure Capital Spending |
HealthcareHealthcare was the strongest relative contributor in the quarter with holdings increasing nearly +16% compared to benchmark returns of roughly +12%. Exact Sciences was acquired for a significant premium by Abbott Laboratories resulting in an +86% return, while other strong performers included Tarsus Pharmaceuticals, Glaukos following approval of a new product, Penumbra, and Repligen driven by strong earnings results. |
M&A Product Approval Earnings Biotech | |
| 2025 Q2 |
Growth |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jul 21, 2025 | Fund Letters | JB Taylor | GSHD | Goosehead Insurance, Inc. | Financials | Insurance | Bull | NASDAQ | Brokerage, franchise, Insurance, productivity, scaling, technology | Login |
| Jan 22, 2026 | Fund Letters | JB Taylor | FOUR | Shift4 Payments, Inc. | Financials | Transaction & Payment Processing Services | Bull | New York Stock Exchange | consumer, Fintech, growth, Payments, Sentiment | Login |
| Jan 22, 2026 | Fund Letters | JB Taylor | VITL | Vital Farms, Inc. | Consumer Staples | Agricultural Products | Bull | NASDAQ | agriculture, Consumerbrands, Loyalty, Margins, Pricing | Login |
| Jan 22, 2026 | Fund Letters | JB Taylor | TREX | Trex Company, Inc. | Industrials | Building Products | Bull | New York Stock Exchange | Buildingproducts, Cyclicals, Decking, Housing, Quality | Login |
| Jan 22, 2026 | Fund Letters | JB Taylor | FROG | JFrog Ltd. | Information Technology | Application Software | Bull | NASDAQ | AI, cloud, Devops, Security, Software | Login |
| Jan 22, 2026 | Fund Letters | JB Taylor | FN | Fabrinet | Information Technology | Electronic Components | Bull | New York Stock Exchange | AI, datacenters, Networking, Optics, semiconductors | Login |
| Jan 22, 2026 | Fund Letters | JB Taylor | RBC | RBC Bearings Incorporated | Industrials | Industrial Machinery | Bull | New York Stock Exchange | Acquisitions, Aerospace, Defense, engineering, growth | Login |
| TICKER | COMMENTARY |
|---|---|
| FN | Fabrinet Information Technology 1.6 |
| FOUR | Relative weakness was also driven by Shift4 Payments |
| FROG | Lastly was JFrog Ltd., the portfolio's strongest performer this quarter. JFrog manages the software supply chain and enables organizations to securely deliver software updates across their enterprises. Demand for security increased following the recent NPM supply chain attack. JFrog's security add-on—which secures open-source packages before organizations onboard them—has seen significant pipeline growth, driving a 32% rally in its shares. |
| RBC | RBC Bearings, Inc. (RBC) manufactures engineered precision bearings and related products for customers in the aerospace, defense, and industrial markets. It is a market leader with a strong reputation for technical capabilities, product quality, and on-time delivery. RBC outperformed in 4Q as its quarterly results beat consensus estimates on both revenue and EPS. Its Aerospace and Defense business (A&D, 44% of total revenue) was particularly strong, essentially 'firing on all cylinders.' Management expects strong growth in its A&D backlog and is in the process of adding capacity to meet demand. Growth in its Industrial business (56% of total revenue) remains sluggish, but management has significantly improved the profit margins of this business and is now in the process of implementing growth initiatives. We continue to like RBC's leadership team, well-established strategic playbook, as well as its opportunities for growth and capital deployment. |
| TREX | TREX Company, a leader in composite decking, was our biggest laggard in Industrials during the fourth quarter, as an increasingly competitive environment and weaker end-market trends led to poor Q3 results. TREX saw business fall off after Labor Day, which is inconsistent with results from other peers and surveys. It was quite surprising and may be a function of its higher DIY business. Regardless, this contradicts our thesis, so we exited the position. |
| VITL | Vital Farms is a provider of specialty eggs and butter from small farms and pasture-raised animals. Consumers are increasingly focused on how the food they eat is sourced, both with respect to the health implications and how the animals involved are treated. As the fourth quarter began, the company went live with a new enterprise resource planning (ERP) system designed to automate manual processes and provide a scalable platform to support rapid growth. Vital experienced some hiccups in implementing the ERP system, which weighed on volumes and led management to lower full-year guidance in December. In our view, however, the increasing focus on higher quality food sourced sustainably and ethically is a durable trend that will largely resist any temptation to trade down on eggs. |
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