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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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Buyside Digest is not affiliated with, and does not endorse, Wasatch Small Cap Growth Strategy. This analysis is provided for institutional research purposes only and is not investment advice.
"Wasatch Small Cap Growth trailed the benchmark in Q2 2026 as speculative AI stocks reached dot-com-era valuations, but the managers maintain conviction in their quality-focused approach. Portfolio fundamentals remain strong with 20%+ earnings growth across many holdings."
The Wasatch Small Cap Growth strategy gained in Q2 2026 but trailed the Russell 2000 Growth Index's 25.71% return as market leadership remained narrow and concentrated in AI-related companies. The market's preference for lower-quality, speculative businesses created headwinds, with non-biotechnology companies trading above 30 times sales reaching their highest weighting since the dot-com bubble. Despite underperformance, the managers remain confident in their disciplined approach, noting that portfolio company fundamentals remain strong with many growing revenue and earnings in excess of 20%. The strategy holds AI beneficiaries like JFrog, Everus Construction Group, and AAON that contributed meaningfully to performance, but focuses on businesses with durable competitive advantages and long-term growth drivers extending beyond the current AI spending cycle. The managers have capitalized on the market's one-sided nature by concentrating capital in steady growth companies trading at attractive valuations. Top detractors included Ensign Group, Procore Technologies, and Ollie's Bargain Outlet. The managers believe the portfolio is well positioned for long-term investors, drawing parallels to past periods like the dot-com aftermath when disciplined focus on fundamentals led to strong outperformance.
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