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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Wasatch Micro Cap Fund 2025 Q1 Investor Letter | Buyside Digest

Back to Fund Profile (Wasatch Micro Cap Fund)

Primary Source Intelligence • Q1 2025 Letter Analysis

Wasatch Micro Cap Fund Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Wasatch Micro Cap Fund. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD-0.17%

Annualized+11.04%

Positioning StanceConstructive

Market CapMicroCap

GeographyUS

Digest Analysis

Quick Take

"Wasatch Micro Cap outperformed during Q1's sharp market decline by leveraging strong insurance holdings while healthcare positions detracted."

Executive Summary

The Wasatch Micro Cap Fund returned -16.57% in Q1 2025, outperforming the Russell Microcap Growth Index's -17.75% return. The quarter saw U.S. equities decline sharply from mid-February highs due to concerns over tariffs, budget cuts, and economic weakness, leading to stagflation worries that particularly weighed on micro-cap stocks. The Fund's overweight to financials, especially insurance companies, was a key performance driver as these holdings benefited from strong operating results. Top contributors included HCI Group, which benefited from lower hurricane claims and firmer pricing, and Bowhead Specialty Holdings, which announced strong earnings and 20% growth expectations. Healthcare holdings detracted from performance as biotechnology and pharmaceutical stocks sold off, with Addus HomeCare pressured by potential Medicaid cuts. The managers used the market selloff as an opportunity to concentrate the portfolio, selling lower-conviction positions and increasing weights in high-quality companies. The portfolio is now more concentrated with 20 stocks comprising over half the weight, positioning for an environment of growing inflation and economic concerns.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

78%

CautiousHigh

High Conviction (78%)

High conviction evidenced by significant portfolio concentration during the quarter - moving to 20 stocks comprising over half the portfolio weight and 40 stocks comprising 80%. Managers explicitly state they 'made the portfolio more concentrated among stocks in which the risk-reward profile now appears exceptional' and express confidence in larger positions.

Growth Outlook

38%

BearishBullish

Neutral (38%)

The letter describes a challenging market environment with sharp declines from February highs, concerns over tariffs, budget cuts, economic weakness, and stagflation worries. However, the managers frame this as creating opportunities for quality companies at attractive valuations.

Risk Appetite

25%

DefensiveAggressive

Defensive (25%)

The managers increased concentration during the quarter, moving from a more diversified approach to having 20 stocks comprise over half the portfolio weight. They express confidence in owning high-quality companies at larger positions, indicating a selective risk-on approach.

Capital Deployment

20%

De-riskingDeploying

De-risking (20%)

The managers engaged in capital rotation during the quarter, selling lower-conviction positions and concentrating into higher-conviction names. This represents portfolio optimization rather than net deployment or de-risking, with no cash level changes mentioned.

Forward Guidance

15%

CautiousExpansionary

Cautious (15%)

The managers express confidence in their concentrated positioning and view the current environment as providing opportunities to improve portfolio quality. They are positioned for continued ownership of high-quality companies but acknowledge the challenging macro environment.

Language Signal

45%

BearishBullish

Balanced (45%)

The letter contains significant risk language around stagflation, economic weakness, tariffs, and Medicaid cuts, but balances this with opportunity language around attractive valuations, strong fundamentals, and portfolio quality improvement.

Perceived Risk

65%

Low RiskElevated

Elevated Risk (65%)

The managers identify multiple specific macro risks including stagflation concerns, tariffs, budget cuts, economic weakness, and potential Medicaid cuts affecting healthcare stocks. They acknowledge growing inflation and economic concerns as affecting the investment environment.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

The managers view market selloffs as creating opportunities to improve portfolio quality when valuations for high-quality companies become attractive. They successfully identified and acted on opportunities during the quarter's market decline.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The managers demonstrate a multi-year investment horizon, expressing continued conviction in Weave's long-term growth potential despite short-term guidance concerns, and positioning for confident ownership of quality companies through economic uncertainty.