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Company Philosophy
The investment philosophy for the Wasatch Equity Funds is straightforward. Earnings growth drives stock prices over the long-term. Wasatch invests in smaller companies because we believe they can grow faster for a longer time than large companies.
While there is no doubt that other factors influence stock prices, it has been our experience that if we invest in rationally priced stocks of companies with the potential to produce strong earnings growth, over time stock price performance will take care of itself when companies meet or exceed our expectations. To Wasatch, a rationally priced stock is one with a price-to-earnings ratio (P/E) that is approximately equal to the company’s expected five-year earnings growth rate.
The Wasatch Micro Cap, Small Cap Growth, Core Growth, Ultra Growth and Heritage Growth Funds focus on investing in what we believe are “America’s Best Growth Companies” (ABGCs).* The Wasatch International Growth and International Opportunities Funds focus on investing in what we believe are the “World’s Best Growth Companies” (WBGCs).** The Wasatch Global Science & Technology Fund focuses on investing in growing companies in industries related to science and technology within the U.S. and abroad. The Wasatch Micro Cap Value and Small Cap Value Funds strive to invest in companies that we believe are temporarily undervalued, but have significant potential for stock price appreciation. Our goal is to keep the Funds as fully invested as possible. This is inherently a long-term approach to investing.
*ABGCs are companies that we believe possess an identifiable, sustainable competitive advantage, are underfollowed, undervalued, well-managed and have the potential to double in size within five years.
**WBGCs are companies outside the United States that we believe possess an identifiable, sustainable competitive advantage, are well-managed, undervalued and are producing above average earnings growth relative to their industry and country of origin.
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