Wasatch Emerging Markets Small Cap FundTM (WAEMX)  Invest in this Fund 

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Landscape

The Emerging Markets Small Cap Fund is one of few emerging markets funds uniquely focused on smaller companies.

What is this fund's objective?

The Emerging Markets Small Cap Fund seeks to provide long-term growth of capital. The fund invests primarily in the equity securities of small companies tied economically to emerging markets. In this way, it takes advantage of the dynamic growth potential of smaller, less discovered companies in budding economies.

What kind of companies does this fund hold?

Portfolio Managers Roger Edgley and Laura Geritz seek out the World’s Best Growth Companies. As we analyze emerging market companies, we are most interested in finding:
  • Potential for significant and sustained revenue and earnings growth
  • An experienced, proven management team
  • High return on capital
  • Sustainable competitive advantage
  • Market leadership and/or growing market share
  • Ability to capitalize on favorable long-term trends
  • Strong financial health and controls
  • Reasonable use of debt
  • Expanding operating margins
  • Substantial insider ownership
  • Stable investment environment
  • Attractive valuation

How do we find them?

We use a bottom-up process of fundamental analysis to look for individual companies that we believe are high-quality, stable, and have the potential to grow earnings for long periods of time. To determine that a company has these characteristics, Roger and Laura take the following approach:          

Screening
Using financial databases, we screen for companies demonstrating high-quality growth. We are typically looking for:

  • Steady earnings growth
  • Rising return on assets (ROA) trends
  • High absolute levels of ROA vs. historical and peers
  • Accelerating revenues
  • Improving cash flows
  • Positive inflections in income statement or balance sheet metrics

Deep Due Diligence
We use a thorough and collaborative process to understand the companies in which we invest.  We study the company, its competitors, and its industry.  We talk with management to verify the quality of the leadership and gain deeper insight for the company’s prospects and risks.  We call competitors, suppliers, and customers to make sure we have a complete picture of the landscape.  Meanwhile, we are constantly talking with other Wasatch portfolio managers and analysts in order to leverage the knowledge, perspective, and insight of the broader Wasatch team in every investment decision.

Earnings Models
We build proprietary earnings models in order to analyze a company’s key growth drivers. Our models help shape our projections of a company’s potential for earnings growth and what we believe to be a fair price for the stock.

Valuation
We consider a variety of appropriate valuation metrics (e.g. Price to Earnings, Enterprise Value to EBITDA, Price to Book, etc.) to assess the potential return and the risk/reward trade-off of each stock.  Valuation is an important component of every investment decision.

Roger and Laura limit the purchase of stocks to those companies the team believes are reasonably priced relative to their expected long-term growth rate.

Investing in small or micro cap funds will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.

Investing in foreign securities, especially in emerging markets, entails special risks such as unstable currencies, highly volatile securities markets and political and social instability, which are described in more detail in the prospectus.

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