Wasatch Global Opportunities Fund® (WAGOX)  Invest in this Fund 

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Global Equities Snapped Back in the First Quarter

“In our view, global equities were due for a recovery. We saw the fourth-quarter selloff as the product of an event-driven market that didn’t reflect continuing fundamental business strength both in the U.S. and elsewhere.”

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For the period ended March 31, 2019, the average annual total returns of the Wasatch Global Opportunities Fund  for the one-year, five- and ten-year periods were 2.32%, 8.42%, and 15.82%, and the returns for the MSCI AC World Small Cap Index were -2.72%, 5.54%, and 14.29%. Total Expense Ratio: 1.55%.


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.


Led by the U.S.—and growth stocks in particular—the MSCI All Country (AC) World Small Cap Index snapped back from its fourth-quarter swoon. The Index gained 13.10% for the first quarter of 2019, recouping a good portion of the losses from the prior period. The Wasatch Global Opportunities Fund—Investor Class outpaced its benchmark, advancing 16.78%.

In our view, global equities were due for a recovery. We saw the fourth-quarter selloff as the product of an event-driven market that didn’t reflect continuing fundamental business strength both in the U.S. and elsewhere.

After signaling a “patient” approach to raising interest rates in January, the U.S. Federal Reserve (Fed) pleased investors again in March by projecting no further rate hikes this year. The central bank also downgraded its outlook for U.S. economic growth and said it would stop shrinking its balance sheet in September. Taken together, the Fed’s moves undercut the U.S. dollar, making investments in international stocks outside the U.S. somewhat more attractive to investors. Markets also benefited from hopes of a constructive solution to the U.S.-China trade dispute after the Trump administration delayed the imposition of higher tariffs on Chinese imports, citing “productive talks” between the two countries.

Looking at the Fund’s first-quarter results, U.S. holdings generated the lion’s share of the overall total return and contributed the most to the Fund’s outperformance of the Index. Japan was the next-best contributor.

The Fund’s overweight position in India hindered performance relative to the Index, as apprehension ahead of upcoming elections kept Indian equities in check during January and February. A 25% increase in the U.S.-dollar price of Brent crude during the quarter also impacted sentiment toward India, which imports about 80% of the oil it uses. Although our overweight position detracted during the quarter, our Indian holdings outperformed their benchmark counterparts.

On a sector basis, specific information-technology and consumer-discretionary holdings added to the Fund’s return and outperformance of the benchmark. The Fund’s overweight position in information technology was also a plus.

Rather than getting caught up in macro events, our discipline is to focus on the fundamentals of our portfolio companies. These fundamentals remain strong. Moreover, in our calls and meetings with management teams, we continue to receive positive feedback regarding general business conditions and our companies’ competitive positions within their industries.

Details of the Quarter

The Fund’s top contributor for the first quarter was MercadoLibre, Inc. (MELI), which operates e-commerce platforms in Brazil and other Latin American countries. MercadoLibre’s payment solution, MercadoPago, is driving strong growth at the company as an increasing number of e-commerce sites and brick-and-mortar retailers adopt MercadoPago as a preferred payment method. Total revenues in MercadoLibre’s most-recent quarter increased 19.5% versus the year-ago period, topping expectations.

The second-largest contributor was U.S.-based financial transaction processing services provider Euronet Worldwide, Inc. (EEFT). All three segments of the company’s business—Electronic Financial Transaction (EFT) Processing, Money Transfer and epay—experienced double-digit operating-profit growth driven by margin expansion, with particular strength in epay.

Two additional strong performers from the U.S. information-technology sector were Zendesk, Inc. (ZEN) and Ultimate Software Group, Inc. (ULTI). Zendesk is a SaaS (Software-as-a-Service) company focused on providing customer service and engagement products that help organizations support their customers across various channels including phone, chat, email and social media. Zendesk continued to execute its growth plans, including moving upmarket from smaller to larger clients.

In a transaction expected to close in mid-2019, Ultimate Software Group—a cloud-based human capital management solutions provider—agreed to be acquired by a private-equity firm at a premium to the stock’s all-time high closing price, validating our positive analysis of Ultimate’s business model.

Wayfair, Inc. (W) was another large contributor. This online home-products retailer is categorized as a consumer-discretionary firm but is clearly also a technology success story. Wayfair has become a major player in online sales of furniture and home furnishings in the U.S., and has also begun expanding in Canada and Europe. Wayfair’s share price soared in February after the company reported a 40% year-over-year increase in revenues in its most-recent quarter and a narrower-than-expected loss. Although we typically avoid companies in head-to-head competition with Amazon, Wayfair’s well-established niche and competitive advantage in shipping large items make the stock an attractive holding in our view.

The greatest detractor from Fund performance for the quarter was Metro Bank plc as the stock sold off more than -50%. Metro Bank is a retail bank in the U.K. that has been disrupting the high street banking industry and winning new customers with its customer-first; employee-empowered strategy and culture. During the quarter, Metro had to raise its risk-weightings on certain commercial property loans and buy-to-let mortgages due to an internal misclassification. This required an additional £900 million in capital, a 12% increase over what analysts had expected. On the positive side, Metro was awarded a £120 million grant by Banking Competition Remedies Ltd., an independent body established to promote competition in banking services for small and medium-size enterprises. Despite the volatility in Metro’s stock price and short-term uncertainties, we believe in the company’s vision. Wasatch has a long-standing history with the founder and chairman, having been shareholders in his previous venture Commerce Bank in the U.S. This was a successful long-term investment for Wasatch and our research indicates an even bigger opportunity for Metro Bank in the U.K. If the company can execute its business strategy, we see significant upside potential for Metro Bank’s shares. 

U.S.-listed, Dutch-domiciled Cimpress N.V., a “mass-market customization” printed-materials provider, also weighed on Fund performance as the company reported surprisingly disappointing results across its business lines, owing in part to higher customer-acquisitions costs. We’re looking into our concerns regarding the competitive environment and reevaluating our investment thesis. On the one hand, repeat business from already-acquired customers may support growth even if customer additions slow down. On the other hand, it may be that the company’s small-business customers can now produce for themselves the products previously purchased from Cimpress.

Another detractor from Fund performance for the quarter was Sangamo Therapeutics, Inc. (SGMO). A clinical-stage biopharmaceutical company, Sangamo specializes in the treatment and cure of single-gene disorders. Investors reacted negatively in February to interim results from an early-stage study using the company’s zinc-finger gene-editing technology in vivo for the treatment of Hurler syndrome. However, we think it’s too early to draw conclusions until results from the study’s high-dose subjects have been released. Moreover, Sangamo has already developed a second-generation zinc-finger technology designed for greater editing efficiency. The company expects to begin clinical trials for the newer version later this year.

In addition to in-vivo gene editing, Sangamo’s development pipeline includes gene therapy and ex-vivo genome medicine. The company’s ex-vivo genome-editing programs build on its foundational studies in HIV, which were the first trials to use ex-vivo genome-edited cells as a treatment approach. The company expects data from five different clinical trials this year, including its gene-therapy program for hemophilia A and its ex-vivo gene-edited cell therapy for beta-thalassemia. It’s worth noting that, just after quarter end, Sangamo provided an unscheduled positive clinical update and its stock rose almost 30%. (Current and future holdings are subject to risk.)


After the remarkably swift snapback in stock prices that we’ve seen thus far in 2019, we’re keeping a cautious eye on heightened equity valuations. Such a rapid rate of stock-price appreciation isn’t likely to be sustainable. However, short-term gains have never been the focus of our investment strategy. Instead, we continually look beyond the immediate environment, seeking to invest in outstanding companies with revenue and earnings growth that we believe can be maintained over multiple years.

Over the longer term, we believe that the fundamentals supporting the growth of the U.S. economy remain in place, a view we maintained throughout the market pullback of late 2018. While incoming data suggest some softening of industrial-production numbers, businesses generally remain cautiously optimistic. Bolstered by more accommodative Fed policy, stocks may have further room to appreciate in 2019, particularly if driven by positive economic or political catalysts, such as a face-saving trade deal between President Trump and Chinese leader Xi Jinping.

In other words, we continue to hold a constructive view of the U.S. economy. We’re similarly optimistic with regard to the prospects for U.S. equities and the Fund. While annual U.S. economic growth currently hovers in the relatively decent 2% to 3% range, average top-line growth of companies in the Fund stands at double digits.

In Japan, where stocks generally experienced a difficult fourth quarter, valuations of many companies bounced back in the first quarter. We continue to see strong fundamentals among the Fund’s Japanese holdings. Also, we believe the driving forces behind long-term market reforms remain in place. Moreover, Japan benefits from a stable political environment with still-popular Shinzo Abe on track to become the longest-serving prime minister in Japanese history.

Though current global economic conditions aren’t easy for some large Japanese exporters, the domestic scene is a different story. Many smaller businesses are thriving. An example is Fund holding Nihon M&A Center, Inc., which has seen business reaccelerate following a slowdown in deal flow last year. With business succession a growing issue in Japan, Nihon M&A helps small business owners, often those nearing retirement, to find buyers for their companies. Nihon M&A is the clear leader in a market with a substantial opportunity. The company has partnerships with large banks that provide referrals, which makes it difficult for nascent competitors to gain traction. In March, we spent two weeks in Japan visiting companies and meeting with management teams. We came away with an outlook that is even more positive than it was a quarter ago.

For stocks in the United Kingdom, uncertainty is the greatest problem caused by Brexit. As we have said before, many of the Fund’s U.K. holdings generate the majority of their earnings in foreign markets. For example, during the quarter we added U.K.-based Fevertree Drinks plc, a consumer-staples company that sells premium drink mixers such as tonics. Fevertree recently developed new products to enter the U.S. and other markets and has seen strong sales growth.

Another U.K. holding, Abcam plc is a global leader in the sale of antibodies for life-science research. International markets provide over 90% of Abcam’s revenues. Although the company recently reported weaker-than-expected earnings, we’re taking the long view—Abcam has been positioning itself for the next growth phase by investing in its business to make it more scalable, adding new systems and addressing new markets. We believe Abcam will eventually sell the majority of antibodies used in research around the world through its online platform. Given its scalability, dominant market position and abundant growth opportunities, we’re optimistic about the company’s prospects.

We continue to monitor global political and economic developments that could affect the Fund’s performance. At the same time, our primary focus remains, as ever, on investing in companies with solid fundamentals and strong long-term growth prospects.

Thank you for the opportunity to manage your assets.


JB Taylor, Ajay Krishnan, Ken Applegate and Paul Lambert


**The MSCI ACWI Small Cap Index is an unmanaged index and includes reinvestment of all dividends of issuers located in countries throughout the world representing developed and emerging markets. This index is a free float-adjusted market capitalization index designed to measure the performance of small capitalization securities. You cannot invest directly in this or any index.

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CFA® is a trademark owned by CFA Institute.

The Wasatch Global Opportunities Fund’s investment objective is long-term growth of capital.

As of March 31, 2019, the Wasatch Global Opportunities Fund was not invested in Amazon.com, Inc.

Brexit is an abbreviation for “British exit,” which refers to the June 23, 2016 referendum whereby British citizens voted to exit the European Union. The referendum roiled global markets, including currencies, causing the British pound to fall to its lowest level in decades.

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

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 AC World Small Cap Index is an unmanaged index and includes reinvestment of dividends of issuers located in countries throughout the world representing developed and emerging markets.


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CFA® is a trademark owned by CFA Institute.