Wasatch Global Value Fund (FMIEX)  Invest in this Fund 

Investor Class | Institutional Class
  • print
Stocks Grind Higher as Positive Earnings Reports Outweigh Trade Concerns
by David Powers, CFA, CAIA, CPA

“We believe value stocks broadly are poised to assume the mantle of performance leadership.”

 Download a PDF (235 KB)

As of 10/31/17, the Wasatch Large Cap Value Fund changed its name to the Wasatch Global Value Fund. Prior to 10/31/17, the Fund's primary benchmark was the Russell 1000 Value Index.

Investments in value stocks can perform differently from other types of stocks and from the market as a whole and can continue to be undervalued by the market for long periods of time. Loss of principal is a risk of investing.
Investing in foreign securities, especially in emerging markets, entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus.

For the period ended September 30, 2018, the average annual total returns of the Wasatch Large Cap Value Fund-Investor Class for the one-, five- and ten-year periods were 8.74%, 8.47% and 7.64%, the returns for the MSCI ACWI were 9.77%, 8.67%, and 8.19%.  Expense ratio: Gross 1.19% / Net 1.10%.


Data shows past performance, which is not indicative of future performance. Current performance may be lower or higher than the data quoted. To obtain the most recent month-end performance data available, please click on the “Performance” tab of the individual fund under the “Our Funds” section. The Advisor may absorb certain Fund expenses, without which total return would have been lower. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost.

Wasatch Funds will deduct a 2.00% redemption proceeds fee on Fund shares held 60 days or less. Performance data does not reflect the deduction of fees, including sales charges, or the taxes you would pay on fund distributions or the redemption of fund shares. Fees and taxes, if reflected, would reduce the performance quoted. Wasatch does not charge any sales fees. For more complete information including charges, risks and expenses, read the prospectus carefully.

Wasatch Funds are subject to risks, including loss of principal.


The Wasatch Global Value Fund—Investor Class rose 6.03%, outperforming the core MSCI ACWI (All Country World Index), which returned 4.28% in the third quarter of 2018. The Fund also bested the MSCI ACWI Value Index, which returned 3.98%.

The broad U.S. equity market, as measured by the Russell 3000® Index, rose 7.12% for the third quarter of 2018, compared to a gain of just 1.35% for international equities as gauged by the MSCI EAFE Index. U.S. market performance was supported by continued positive economic growth and generally strong earnings growth for U.S. corporations. Together, these factors helped domestic stocks overcome concerns about protectionist U.S. trade policy and the Federal Reserve’s planned trajectory for increasing interest rates over the remainder of 2018 and throughout 2019. Trade-related concerns weighed on investor sentiment with respect to international equities, as did U.S. dollar strength and signs of slowing economic growth overseas. Despite these headwinds, our international holdings added to the Fund’s return.

Globally, in addition to the outperformance of our U.S. holdings, China, Switzerland and Sweden were strong contributors to the Fund’s return on an absolute and relative basis. The Fund’s investments in the energy sector were weak during the quarter and that hurt our results in the Netherlands and Canada, which have significant energy exposure. Sector returns were led by an overweight to and selection within health care, telecommunication services, financials and utilities. The Fund’s holdings in energy, consumer discretionary and industrials were positive, but our underweights versus the Index detracted from results. 

Details of the Quarter

In terms of individual names, contributions to Fund performance in the quarter were led by our investment in Pfizer, Inc. (PFE). Investor sentiment with respect to the pharmaceutical giant had been somewhat restrained by concern over the impact of patent expirations on the profitability of its drug portfolio. However, Pfizer management has communicated that it expects as many as 30 new drugs to be approved by 2022, with perhaps half carrying “blockbuster” potential. Pfizer’s stock appeared to have been rewarded during the quarter for the company’s strong pipeline of new drugs. We trimmed our position in Pfizer but maintained it as a top weight in the Fund. We continue to view Pfizer as undervalued given the outlook for improved revenue, strengthened free cash flow and higher payouts.

Eaton Corp. plc (ETN) was also among the Fund’s leading contributors for the quarter. The company engineers and manufactures electrical and industrial systems and components for the vehicle, construction, commercial and aerospace markets. While Eaton’s results tend to be highly cyclical, management recently reported better-than-expected revenue and earnings while raising forward guidance. Eaton’s efficiency measures appear to have helped insulate the company’s results from adverse impact on input costs resulting from the trade war between the U.S. and China. We trimmed our position in Eaton to maintain the desired size.

Nordea Bank AB was also a strong contributor for the quarter. Nordea is a leading provider of banking services across the Scandinavian countries. The bank recently moved its operations from Sweden and re-domiciled in Finland, where less onerous eurozone capital requirements should support shareholder-friendly measures such as increased share buybacks and higher dividends. At the same time, Nordea has been engaged in a capital-spending cycle focused on digital technology. These transitions had acted as short-term constraints on Nordea’s results, but the bank recently reported second-quarter net income that beat expectations. In addition, the results reflected that Nordea’s digital investments have led to lower costs and loan-performance trends were positive.

On the downside, shares of Netherlands-based multinational bank ING Groep N.V. (ING) were in negative territory for the quarter. Bank profitability in general has been suppressed by the recent flattening of the yield curve, which shrinks the margin between what banks pay on short-term deposits and the interest they receive on long-term loans. In addition, European banks have been required to increase reserves to meet new accounting standards, limiting the ability to raise dividends. Sentiment with respect to ING was impacted by concerns over lending exposure to Turkey, a larger-than-expected fine related to money laundering that dampened the outlook for dividend increases, and shaky execution in the move to ramp up digital capabilities.   

Within energy, shares of oil-field services giant Schlumberger Ltd. (SLB) slumped in the quarter. Schlumberger has a larger international business than most of its competitors, and overseas exploration and production has been slow to recover from the dive in oil prices experienced over 2014 and 2015. The company’s results in the most-recent quarter were negatively impacted by the cost of mobilizing rigs from the U.S. to meet rising international demand in the wake of the recovery in oil experienced since early 2016. In addition, Permian basin demand for the company’s land services has softened as exploration and production spending there has been reduced given a lack of takeaway capacity (i.e., pipelines). We maintained our position, as Schlumberger has demonstrated the highest return on capital in its space and we believe results stand to benefit from the redeployment of assets to the highly profitable international arena.

A position in Japan-domiciled video-game company Nexon Co. Ltd. also detracted in the quarter. Nexon has a host of popular personal computer and mobile games, with its largest customer bases in China and South Korea and most of its growth coming from China. The stock declined in the quarter as Chinese authorities froze the licensing of new games pending a reshuffling of the applicable regulatory structure. This was followed by the announcement that the Chinese government would seek to implement measures designed to limit the amount of time minors are allowed to play video games, purportedly out of concern for their eyesight. These developments created uncertainty around Nexon’s ability to roll out in China a mobile version of its hugely successful game Dungeon Fighter (Dungeon & Fighter in South Korea). We added to our position in Nexon based on our belief that the regulatory issues in China will be resolved, as well as Nexon’s leading position in a rapidly growing industry and strong balance sheet.


The U.S. economy remains on a positive trajectory, with growth slowing to a degree but remaining higher than in most of the rest of the world. U.S. earnings growth should remain strong, but the rate of growth is expected to ease from here, which has led to a decline in price/earnings multiples. The U.S. is viewed as a defensive market against a backdrop of geopolitical turmoil highlighted by a global trade war, China’s balancing act as it seeks to reform its economy while maintaining acceptable growth, the collapse of the Turkish lira, and a threat to the eurozone from political uncertainty in Italy. Outside the U.S., the Fund is well-diversified geographically and by sector and is positioned defensively in companies we believe are less risky than those in the broader market. For example, we have avoided companies with exposure to emerging markets as prolonged trade tensions will be felt there more than in developed markets.

Credit spreads are near their cyclical lows even as such indicators as rising delinquencies on auto and credit-card loans are flashing late-cycle warning signs. We continue to prefer a defensive-minded approach that we expect will be beneficial as late-cycle dynamics gain additional traction. The Fund remains tilted toward higher-quality companies within the large-cap value universe, as gauged by lower market sensitivity, lower valuations, higher cash flows, higher dividends and stronger balance sheets. In terms of sectors, we remain overweight in energy, which historically has tended to outperform late in the business cycle as commodity prices rise, as well as in the defensive utilities sector. The Fund remains underweight in the highly cyclical consumer-discretionary, industrials and materials sectors.

With U.S. inflation concerns increasing in the wake of strong employment data and increasing risks to Fed policy tilted to the upside in terms of the pace of its rate hiking, we believe value stocks are broadly poised to assume the mantle of performance leadership.

Thank you for the opportunity to manage your assets.


David Powers



**The MSCI ACWI (All Country World Index) captures large and mid cap representation across 23 developed market and 24 emerging market countries. With 2,499 constituents, the Index covers approximately 85% of the global investable equity opportunity set. You cannot invest in this or any index.

Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indexes. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties or originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)

The Russell 1000 Value Index measures the performance of Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000 Index measures the performance of the largest 1,000 companies in the Russell 3000 Index. The Russell 3000 Index is an unmanaged total return index of the largest 3,000 U.S. companies based on total market capitalization. You cannot invest in this or any index.

The Wasatch Global Value Fund has been developed solely by Wasatch Advisors, Inc. The Wasatch Global Value 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 1000 Value Index vest in the relevant LSE Group company, which owns the Index. Russell ® is a trademark of the relevant LSE Group company and is used by any other LSE Group company 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 Global Value Fund or the suitability of the Index for the purpose to which it is being put by Wasatch Advisors, Inc.

CFA® is a trademark owned by CFA Institute.

The Wasatch Global Value Fund’s investment objectives are to seek capital appreciation and income.

Earnings growth is a measure of growth in a company’s net income over a specific period, often one year.

The MSCI ACWI Value Index captures large and mid cap securities exhibiting overall value style characteristics across 23 developed-markets countries and 24 emerging-market countries. You cannot invest directly in this or any index.

The MSCI EAFE Index is an equity index that captures large- and mid-cap representation across 21 developed-market countries around the world, excluding the United States and Canada. With 924 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

The price/earnings (P/E) multiple, also known as the P/E ratio, is the price of a stock divided by its earnings per share.

Return on capital is a measure of how effectively a company uses the money, owned or borrowed, that has been invested in its operations.

Valuation is the process of determining the current worth of an asset or company.

The yield curve is a line on a graph that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares three-month, two-year, five-year and 30-year U.S. Treasury securities. This yield curve is used as a benchmark for other interest rates, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth.

The MSCI ACWI is a broad-based market index that captures large and mid-cap representation across 23 developed markets and 24 emerging markets countries.  The Index commenced operations on 01/01/2001, after the Fund commenced operations.  MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products.

  The Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.  Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Russell Investment Group. 

You cannot invest directly in indexes.

View the Global Value Fund’s most current Top 10 Holdings

Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor.

Read our Holdings Release Policy and why we have one.

CFA® is a trademark owned by CFA Institute.