September 30, 2019 BARRON’S 27
matically jettisoned or that Malooly
doesn’t have control over individual
fund picks. Rather, it’s a way to flag
potential stocks to sell if the need
arises, he says.
Malooly looks for companies that
have business models with unique attri-
butes for their industry, or have recur-
ring revenue, as these models tend to
hold up better in a downturn. For
many managers, this outlook leads to
“disruptive” companies, but Malooly
isn’t necessarily looking for new tech-
nology or strategy; his focus is on
whatever gives a company a competi-
tive advantage. “A company’s valuation
and return profile, along with upcom-
ing catalysts or risk points, determines
if we buy the stock, or revisit,” he says.
The fund can hold up to 30% of its
portfolio in international stocks, al-
though it’s now closer to 10%. Malooly
partners with Wasatch’s global invest-
ment teams to find names, such as
India-based City Union Bank (CUBK-
.India), which he bought just after the
financial crisis. He says its growth rate
and earnings are higher than anything
in the U.S., it has a good management
team, and it’s also a play on India’s
growing middle class.
The current market cycle favors
growth stocks, but Malooly admits that
the fund’s returns could weaken when
value reasserts itself. He is optimistic
that the fund will still outperform its
peers, but he is trying to set expecta-
tions for new investors. “I don’t expect
to see the levels of outperformance I’ve
had simply because I don’t expect to
have those types of return opportuni-
ties in front of me,” he says.
Wasatch managers are bottom-up
investors, so they don’t make macroeco-
nomic calls or use them to drive their
approach. Instead, Wasatch is “macro
aware,” Malooly says, and that was a
lesson the firm learned coming out of
the 2008 global financial crisis and dur-
ing few rough years afterward, which
point to the fund’s bouts of volatility.
Those experiences reinforced the focus
on high-quality companies and manage-
ment teams that can grow regardless of
the economic environment.
Given macro trends, he might con-
sider swapping some higher-growth
businesses for slower-growing compa-
nies to help improve risk-adjusted re-
turns. But low-volatility stocks are now
too expensive for the growth they offer.
“I’m really focused on making sure the
companies I hold continue to grow and
execute,” Malooly says.
themselves. CEO Steven Beauchamp
has won Glassdoor’s employee’s choice
award for highest-rated CEO for three
straight years. Malooly says that if
managers are there for their employ-
ees, the resulting loyalty contributes to
good long-term results.
The balance between imagination
and skepticism informs holdings such
as Freshpet (FRPT), which sells refrig-
erated fresh pet food. Malooly passed
on the IPO; a year later, the stock price
was halved. He became interested when
CEO William “Billy” Cyr, the former
CEO of beverage maker Sunny Delight,
stepped in. He thought that Cyr’s expe-
rience in global consumer goods and
refrigerated distribution could help
Freshpet expand. Malooly liked Fresh-
pet’s innovative business model, even if
“on the surface it seemed a little bit
questionable,” he says.
He attributes the fund’s outperfor-
mance to Wasatch’s strong stock-
picking culture. The firm periodically
ranks its holdings by scrutinizing the
past performance of their portfolios in
different time periods, and ranks man-
agement teams from top to bottom as
a way to internally assess management
quality. It helps team members to min-
imize the effects of cognitive and be-
havioral biases in their investment
process as much as possible.
This exercise doesn’t mean that
stocks in the bottom quartile are auto-
Wasatch Ultra Growth
Note: Holdings as of 6/30. Returns as of 9/23; five- and 10-year
returns are annualized.
Sources: Morningstar; Wasatch Global Investors
Total Return
1-Yr 5-Yr 10-Yr
WAMCX 2.3% 16.9 15.8
Russell 2000 Growth -7.1 9.5 12.5
Top 10 Holdings % of Assets
Company / Ticker
Kornit Digital / KRNT 3.0%
Trex / TREX 2.8
Paylocity Holding / PCTY 2.3
Insulet / PODD 2.2
HubSpot / HUBS 2.1
Knight-Swift Transportation
Holdings / KNX
1.9
Freshpet / FRPT 1.8
Zendesk / ZEN 1.8
InterXion Holding / INXN 1.8
Goosehead Insurance /
GSHD
1.8
Total 21.5
Scoreboard: Fiscal Jolt
(Indiaequities soared,up8.8%,afterthegovernmentannounced acorporatetaxbreakdesignedto
stimulateaslowingeconomy.U.S.stocks soldoff,ledbyaslumpingbiotech,down3.57%.
OneWeek Year-to-Date
U.S.STOCKFUNDS – 1.15% 18.57%
TOPSECTOR/IndiaRegionFunds 8.80 3.95
BOTTOMSECTOR/Health/BiotechnologyFunds – 3.57 6.63
S&P500 – 0.97 18.78
U.S.BONDFUNDS 0.21 7.43
BloombergBarclaysAGGBond 0.41 7.47
THEWEEK'STOP25
Fund InvestmentObjective OneWeek Year-to-Date
WasatchEmgIndiaInv/WAINX IndiaRegion 9.49% 8.1%
EatonVanceGrIndiaA/ETGIX IndiaRegion 9.23 5.2
ALPS/KotakIndiaGroI/INDIX IndiaRegion 8.81 4.5
MatthewsAsiaIndiaInv/MINDX IndiaRegion 7.33 – 2.6
CGMTrFocusFund/CGMFX Multi-CapValue 5.23 – 12.5
NvgtrSentryMgdVolI/NVXIX EquityMktNeutral 2.54 – 39.2
WasatchEmMktsSelInst/WIESX EmergingMarkets 2.47 16.8
AltegrisGSATrendStrN/TRNNX AltMulti-Strategy 2.40 6.1
GlobalRatesI/FXFIX AltCurrencyStrat 2.22 11.6
NatixisASGMgFutStrY/ASFYX AltMgdFutures 2.09 13.4
PIMCOExtendDurInst/PEDIX CorpDebtBBBRtd 2.04 26.3
RBBCampbellDynTInst/CDRTX AltMgdFutures 1.95 12.3
WasatchEmgMktSCInv/WAEMX EmergingMarkets 1.92 14.7
GPSIIMgdFutStrSvc/GPMFX FlexiblePortfolio 1.89 12.8
CoreMrktNtrlInst/STAKX AltLong/ShortEq 1.88 2.1
LazardGlLstdInfrInst/GLIFX GlbInfrastructure 1.86 17.7
FranklinCustUtilA1/FKUTX Utility 1.85 26.9
WasatchHoisUSTrInv/WHOSX GenlUSTreasury 1.74 23.3
AQRMgdFutStrHVI/QMHIX AltMgdFutures 1.70 6.9
ICONUtilitiesS/ICTUX Utility 1.67 21.3
VanguardLg-TmTrsAdm/VUSUX GenlUSTreasury 1.67 19.0
RydexUtilitiesInv/RYUIX Utility 1.65 20.5
AQRAlternatRiskPrmI/QRPIX AbsReturn 1.62 1.7
ComstockCapValI/CPCRX SpecialtyDvsfdEq 1.62 – 19.0
TRowePriceTresLong/PRULX GenlUSTreasury 1.60 18.7
THEWEEK'SBOTTOM10
Fund InvestmentObjective OneWeek Year-to-Date
EventideHlthcare&LSI/ETIHX Health/Biotech – 7.63% 10.9%
CannabisGrowthInst/CANIX Specialty&Misc – 7.23 NA
FranklinStrBDA/FBDIX Health/Biotech – 6.03 8.4
PerkinsDiscovery/PDFDX Small-CapCore – 5.92 5.5
AmericanGrowthIIE/AMREX Specialty&Misc – 5.77 – 2.6
SparrowGrowthFundA/SGFFX Multi-CapGrowth – 5.73 14.0
FidelitySelHealthCare/FSHCX Health/Biotech – 5.61 – 5.4
VictoryGlNatResY/RSNYX GLNaturalResourc – 5.48 – 36.9
RydexEnergySvcsInv/RYVIX NaturalResources – 5.40 – 10.1
JacobSmallCapGroInst/JSIGX Small-CapGrowth – 5.28 3.6
THELARGEST25
Assets 3-Year* 1-Week YTD
Fund (billions) InvestmentObjective Return Return Return
FidelityContrafund/FCNTX $92.9 Large-CapGrowth 14.9% – 1.52% 18.6%
VanguardWellingtonAdm/VWENX 89.4 MixTgtAllGro 9.9 – 0.36 16.3AmericanFundsGroA/AGTHX 87.3 Large-CapGrowth 12.9 – 2.25 15.6
AmericanFundsIncA/AMECX 73.4 MixTgtAllMod 7.1 – 0.26 12.7
AmericanFundsBalA/ABALX 71.7 MixTgtAllGro 8.8 – 0.54 12.6
AmericanFundsEuPcR6/RERGX 68.6 IntlLarge-CapGrowth 6.9 – 0.65 15.9
PIMCOIncomeInst/PIMIX 68.1 Multi-SectorInc 5.4 0.12 5.2
Dodge&CoxStock/DODGX 67.6 Large-CapValue 11.0 – 2.31 12.7
AmericanFundsCIBA/CAIBX 64.1 GlobalEquityIncome 5.0 – 0.47 11.1
Dodge&CoxIncome/DODIX 61.9 CoreBond 3.5 – 0.42 7.8
AmericanFundsICAA/AIVSX 59.5 Large-CapCore 9.4 – 1.56 13.7
AmericanFundsWashA/AWSHX 58.9 Large-CapCore 12.8 – 1.02 17.0
VanguardPRIMECAPAdm/VPMAX 56.8 Large-CapCore 14.2 – 1.32 14.7
PIMCOTotRtnInst/PTTRX 53.3 CorePlusBond 3.6 0.45 8.3
AmericanFundsFInvA/ANCFX 51.8 Large-CapCore 11.4 – 1.58 15.2
AmericanFundsCWGIA/CWGIX 50.3 GlobalLarge-CapCore 8.3 – 1.27 14.8
DoubleLineTotRtnI/DBLTX 47.2 USMortgage 3.2 0.37 5.9
Dodge&CoxIntlStock/DODFX 46.2 IntlLarge-CapCore 4.5 – 1.56 11.1
MetWestTotalReturnI/MWTIX 44.9 CorePlusBond 3.2 0.41 8.8
VanguardWellesleyAdm/VWIAX 44.6 MixTgtAllocCon 6.6 0.24 13.5
VanguardTgtRet2025Inv/VTTVX 43.6 Mixed-AssetTarget2025 7.6 – 0.36 13.8
VanguardSh-TmInvAdm/VFSUX 42.6 ShortInvGrade 2.4 0.24 5.1AmericanFundsNPerA/ANWPX 42.4 GlobalLarge-CapGrowth 11.9 – 1.26 18.5
FidelityStrAdvCreInc/FPCIX 42.0 GeneralBond 3.5 0.31 8.6
TRowePriceBCGro/TRBCX 41.8 Large-CapGrowth 18.3 – 2.16 19.8
*Annualized09/22/2016to09/26/2019.ThroughThursday. Source:Lipper