Market Leadership Shifted as Investors Gained Confidence in a Post-Covid Economic Rebound

During the several years prior to 2021, we were well rewarded on an absolute and a relative basis for identifying high-quality growth companies. This year, however, we’ve performed more modestly amid an environment that’s favored value-oriented companies.

At Wasatch, we’re mainly growth-oriented investors. Some of our strategies and funds pursue faster growth often in higher-priced companies, while several of our strategies and funds accept somewhat slower growth in lower-priced companies. Broadly speaking, we have a baseline goal of seeking companies that can roughly double their sales and earnings in the coming five years.

Over the long term, we believe sales growth and earnings growth will be reflected in the stock returns of our companies. To give you a sense of how Wasatch has performed over the past few years, let’s consider all of the 14 Wasatch funds—including U.S., international, global and emerging markets funds—that have at least five years of performance.

Wasatch Performance Through 2020

For the five years ended December 31, 2020, the average Wasatch fund outperformed its benchmark by about 5.7 percentage points per year and the median Wasatch fund outperformed its benchmark by approximately 5.5 percentage points per year. During the three years ended December 31, 2020, the results were even better: about 10.7 percentage points of outperformance per year for the average fund and approximately 10.9 percentage points per year for the median fund.

Moreover, for both periods—the five years and the three years—it’s important to note that the percentages weren’t skewed by outliers. On an individual basis, 13 of the 14 Wasatch funds outperformed their benchmarks over the five years and the three years.

This discussion isn’t meant to imply that our investment horizon is just a few years. In fact, our horizon is much longer—ideally around 10 years or more. We do try to make detailed projections of a company’s potential sales and earnings over the next five years. Projections beyond five years are also important but they’re much more susceptible to misjudgments. For the purpose of evaluating strategy and fund performance, we think a time period that includes a full market cycle is necessary because stock returns often come in unpredictable fits and starts. You can access all of the standardized performance as of March 31, 2021 for the Wasatch strategies and funds at