Wasatch Frontier Emerging Small Countries FundTM (WAFMX)  Invest in this Fund 

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Landscape Emerging India

The Frontier Emerging Small Countries Fund is one of the few funds uniquely focused on frontier markets and emerging small countries.

What is this fund's objective?

The Fund’s investment objective is long-term growth of capital. The Fund invests primarily in the equity securities of companies that are tied economically to frontier markets and small emerging market countries. In this way, it takes advantage of investment opportunities that arise from long-term trends in demographics, deregulation, offshore outsourcing and improving corporate governance.

What kind of companies does this fund hold?

Portfolio Manager Laura Geritz seeks out the World's Best Growth Companies* in frontier markets and emerging small countries. As we analyze frontier markets and emerging small country companies, we are most interested in finding:

  • Sustainable competitive advantage
  • An experienced, proven management team
  • Potential for significant and sustained revenue and earnings growth
  • High return on capital
  • 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
  • Attractive valuation

*A term coined by Wasatch Funds, these are what we believe to be the highest quality companies in or outside the United States that possess an identifiable, sustainable competitive advantage, are well managed, and are producing above-average earnings growth relative to industry/country of origin.

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, our research team takes 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 may 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.

We 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 frontier and 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.

The Fund is non-diversified, meaning it can invest a larger portion of its assets in the stocks of a limited number of companies than a diversified fund.  Non-diversification increases the risk of loss to the Fund if the values of these securities decline.

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