The United Kingdom: A “Value Market” With Exciting Small-Cap Growth Opportunities

Wasatch Global Investors

After Brexit and a poor early response to Covid-19, the U.K. economy is now recovering—and a continued rotation toward small caps may be in the offing.


  • Brexit and the pandemic didn’t change the fundamental attractiveness of great U.K. companies with high returns on capital and strong management teams operating in expanding business segments.
  • Now that uncertainties are lessening, we believe investors will increasingly recognize which companies are most underpriced and best-positioned to expand and take market share over the long term.
  • There’s been a remarkable recovery in the U.K. economy. GDP growth at over 7% in 2021 is expected to be the strongest since the aftermath of World War II, and significant growth is likely to continue through 2022.
  • After five years of underperformance, the 2021 year-to-date outperformance by U.K. small caps may be the start of more to come as vaccine distribution continues, the economy further reopens, and businesses and consumers increasingly gain confidence.
  • Especially today, economically sensitive stocks are often considered synonymous with “value stocks” because they had been major laggards over the past several years as investors preferred technology-related names.
  • At Wasatch, we’re emphatically growth-oriented investors in high-quality companies. But we also seek exposure to continued economic reopening in places like the United Kingdom. And we think we have another wind at our backs based on lower valuations for U.K. stocks.