December 7, 2020 BARRON’S 35
value of less than $1.5 billion, or are smaller
than the largest company in the Russell
Microcap index when purchased. Micro
Cap doesn’t automatically sell holdings if
they surpass the $1.5 billion threshold,
which is why the fund has a higher
weighted average market cap and median
market cap than its benchmark, Korngiebel
says. “We are really investing with the idea
of what the company is going to look like
over the next five years,” he says.
Korngiebel divides the portfolio into two
buckets: disruptive companies with a good
chance of doubling in size in about three
years, and firms with predictable growth
rates that may double in about five years.
The faster-growing firms “have great eco-
nomic engines,” showing high profitability
or a margin structure that will grow when
scaled up as costs fall, he says. These firms
are in big markets with innovative products
and services where they can grab market
share, such as apparel and home products.
The more-stable companies will still show
attractive growth rates in the mid-single to
low-double digits, he says. They tend to be
in less-cyclical markets, such as health care,
and if they operate in a fragmented industry,
it means less competition and potential
growth through mergers and acquisitions.
Korngiebel looks for quality companies
whose market cap may increase enough to
eventually be owned broadly across the
Wasatch platform. He likes firms with little
debt, a solid management team, and strong
company culture. He has to be convinced
that the management team can execute the
strategy, and he gets a feel for company
culture through site visits—which are
currently curtailed due to the coronavirus.
Micro Cap’s No. 1 holding,Kornit
Digital(KRNT), reflects this investment
philosophy. The fund first purchased the
stock in mid-2017 when the company’s mar-
ket value was about $500 million; it’s now
$3.6 billion. Kornit economically uses digital
screen printers to make custom, short-run
designs for both apparel and home décor
with 24-hour turnaround times, and
Korngiebel saw that the company was
poised to take advantage of the personaliza-
tion trend. Kornit benefits from the growth
in e-commerce—Amazon.com(AMZN) is a
customer—but it is also making inroads into
high fashion, as Versace also uses Kornit’s
technology.
Korngiebel first became interested
in No. 3 holdingPurple Innovation
(PRPL), maker of the Purple mattress,
when CEO Joe Megibow joined in 2018
after building e-commerce businesses at
traditional retailers. Purple sells both di-
rectly to consumers and in retail stores,
giving it brand recognition that benefited
its e-commerce business when the whole-
sale business shut down due to pandemic-
induced lockdowns. Korngiebel bought
Purple stock in March at a market cap
around $650 million—it is now $1.6 billion.
Purple operates in the premium segment,
so there is less price competition, he says,
and the founders have expertise in material
science, so they can branch out to nonmat-
tress goods such as pillows and bedding.
An example of companies in Micro Cap’s
second bucket, of stable but less rapid
growth, isTranscat(TRNS), which does
testing calibration for the life-sciences and
other highly regulated industries. Trans-
cat’s industry is fragmented, and Korngi-
ebel says he likes that CEO Lee Rudow has
industry experience building and selling a
company to a larger competitor. Transcat
recently installed technology systems to
automate some testing features and in-
crease productivity, a pathway to expand-
ing margins, he says. First bought in 2018
at a market cap of $150 million, the com-
pany is now at $240 million, “and it’s not
hard to see it doubling again,” he says.
Looking to 2021, Korngiebel says that he
can’t predict where the economy will go,
but he believes that markets are in an in-
between phase when it comes to the pan-
demic: beyond the initial trauma but not yet
past it, even as vaccine hopes rise. He has
started nibbling on growth companies in the
hardest-hit industries, such as airlines and
hotels. Some portfolio shake-ups may be
coming, too, he says. “There are opportuni-
ties to recycle some of the companies that
have been big winners, or the larger market
caps in the portfolio, with companies that
are squarely microcap, as well as those that
may have some recovery aspect.”B
Wasatch Micro Cap Fund
Total Return
1-Yr 3-Yr 5-Yr
WMICX 56.8% 30.0% 25.4%
Russell Microcap Index 18.7 6.0 9.1
Top 10 Holdings
Company / Ticker Weighting
Kornit Digital / KRNT 3.1%
Silk Road Medical / SILK 2.8
Purple Innovation / PRPL 2.8
Open Lending / LPRO 2.8
GenMark Diagnostics / GNMK 2.7
Freshpet / FRPT 2.5
Castle Biosciences / CSTL 2.4
Collectors Universe / CLCT 2.1
Five9 / FIVN 2.1
Cresco Labs / CL.Canada 2.0
Total 25.3%
Note: Holdings as of Sept. 30. Returns through Nov. 30; three- and
five-year returns are annualized.
Source: Wasatch Global InvestorsScoreboard: ReturntoGold
(Stockscontinuedtoadvance,withtheS&P500up1.02%ongoodvaccinenews.Butadeclineinthedollar
andtalkofareliefbillbroughtgoldbackafterweeksofdeclines.Preciousmetalsfundsbounced5.22%.
OneWeek Year-to-Date
U.S.STOCKFUNDS 0.81% 15.02%
TOPSECTOR/PreciousMetalsEquityFunds 5.22 27.12
BOTTOMSECTOR/UtilityFunds – 1.63 – 0.45
S&P500 1.02 13.49
U.S.BONDFUNDS 0.34 5.32
BloombergBarclaysAGGBond – 0.05 6.77
THEWEEK'STOP25
Fund InvestmentObjective OneWeek Year-to-Date
CannabisGrowthI/CANIX Specialty&Misc 7.01% 20.9%
MidasFund/MIDSX PreciousMetalsEq 6.90 9.9
USGlblGold&PM/USERX PreciousMetalsEq 6.87 28.9
FranklinGld&PrMtA/FKRCX PreciousMetalsEq 6.85 35.0
InvscGld&SMA/OPGSX PreciousMetalsEq 6.79 33.1
OCMGoldAdv/OCMAX PreciousMetalsEq 6.42 37.7
MercatorInterOppInst/MOPPX IntlSm/Mid-CapGrowth 6.17 47.2
VanEckIntlGoldY/INIYX PreciousMetalsEq 6.08 37.6
ERSharesUSSCInst/IMPAX Small-CapGrowth 6.05 38.0
AegisValueI/AVALX Small-CapValue 5.84 12.9
SprottGoldEquityInv/SGDLX PreciousMetalsEq 5.70 26.2
WellsFargoPrecMetA/EKWAX PreciousMetalsEq 5.48 22.2
AlphaCentricLSHCI/LYFIX Health/Biotech 5.43 45.8
JacobMicroCapGroInst/JMIGX Small-CapCore 5.43 54.5
USAAPrecMet&MinFund/USAGX PreciousMetalsEq 5.27 23.5
KineticsInternetNL/WWWFX Science&Tech 5.18 36.7
GabelliGoldI/GLDIX PreciousMetalsEq 5.16 24.6
BailGiffPosChgEqK/BPEKX GlobalMulti-CapGrowth 5.14 82.3
QuantifiedSTFInv/QSTFX FlexiblePortfolio 5.11 66.5
EvolutionaryTreeInnov/INVNX Large-CapGrowth 5.08 NA
USGlblWorldPM/UNWPX PreciousMetalsEq 5.08 49.9
RydexPreciousMetlsInv/RYPMX PreciousMetalsEq 4.94 28.8
RWCGlobalEmgEqtyI/RWCIX EmergingMarkets 4.92 25.2
FidelitySelGold/FSAGX PreciousMetalsEq 4.91 23.7
BlackRockLatinAmerA/MDLTX LatinAmerican 4.89 – 21.0
THEWEEK'SBOTTOM10
Fund InvestmentObjective OneWeek Year-to-Date
GlobalCleanEquityI/CGCNX Industrials – 3.51% NA
NvgtrSentryMgdVolI/NVXIX EquityMktNeutral – 3.23 – 35.5
HennessyBPEnergyInst/HNRIX NaturalResources – 3.04 – 27.6
SCMICONUtil&IncInst/ICTUX Utility – 2.40 0.3
RydexUtilitiesInv/RYUIX Utility – 2.38 – 4.8
FranklinCustUtilA1/FKUTX Utility – 2.29 – 1.8
InvescoEnergyA/IENAX NaturalResources – 2.28 – 32.7
IvyEnergyI/IVEIX NaturalResources – 2.26 – 41.1
RGAurum+Ins/GLDPX EquityMktNeutral – 2.25 – 14.8
BlackRockEnrgyOppA/BACAX GLNaturalResourc – 2.16 – 28.7
THELARGEST25
Assets 3-Year* 1-Week YTDFund (billions) InvestmentObjective Return Return Return
AmericanFundsGroA/AGTHX $119.3 Large-CapGrowth 18.4% 1.87% 32.2%
FidelityContrafund/FCNTX 111.4 Large-CapGrowth 18.0 0.98 29.0AmericanFundsBalA/ABALX 85.8 MixTgtAllGro 8.7 0.86 9.2
AmericanFundsEuPcR6/RERGX 85.3 IntlLarge-CapGrowth 9.3 2.14 19.3AmericanFundsIncA/AMECX 74.0 MixTgtAllMod 5.9 0.64 3.5
AmericanFundsICAA/AIVSX 66.3 Large-CapCore 10.0 0.74 12.2AmericanFundsWashA/AWSHX 62.4 Large-CapCore 9.4 0.84 5.9
BlackRockCashInstSLA/ 62.2 InstlMoneyMkt NA NA NAAmericanFundsCIBA/CAIBX 61.5 GlobalEquityIncome 3.9 0.66 1.7
AmericanFundsFInvA/ANCFX 58.2 Large-CapCore 10.7 1.53 11.7TRowePriceBCGro/TRBCX 56.5 Large-CapGrowth 20.6 1.04 32.4
AmericanFundsNPerA/ANWPX 55.8 GlobalLarge-CapGrowth 16.1 1.96 27.6AmericanFundsCWGIA/CWGIX 55.1 GlobalLarge-CapCore 8.5 1.44 12.0
MetWestTotalRtnI/MWTIX 53.0 CorePlusBond 6.0 0.12 8.6FidelityStrAdvLgCp/FALCX 51.4 GlobalLarge-CapCore 0 0.97 0
FidelitySAUSTotStk/FCTDX 45.5 Multi-CapCore 0 1.15 18.4DoubleLineTotRtnI/DBLTX 43.8 USMortgage 3.9 0.08 3.8
FidelityGroCompany/FDGRX 43.5 Multi-CapGrowth 29.3 2.61 62.2FidelityStrAdvCreInc/FPCIX 39.7 GeneralBond 6.0 0.24 8.7
AmericanFundsGroR6/RGAGX 39.1 Large-CapGrowth 18.8 1.88 32.6FidelityBlueChipGr/FBGRX 37.7 Large-CapGrowth 28.1 1.79 54.9
AmericanFundsAMCPA/AMCPX 36.5 Multi-CapCore 13.7 1.12 17.6FidelitySrsInvGdBd/FSIGX 35.1 CoreBond 6.3 0.22 9.2
TRowePriceCapApp/PRWCX 34.6 MixTgtAllGro 13.4 0.50 16.4PGIMTotRtnBondZ/PDBZX 33.9 CorePlusBond 6.1 0.26 7.3
*Annualized11/30/2017to12/03/2020.ThroughThursday. Source:Lipper