Wasatch adopts a disciplined approach to investing, focusing on bottom-up, fundamental analysis to develop a deep understanding of the investment potential of individual companies. Wasatch believes the typical approach to emerging markets investing leads to a poorly diversified portfolio, heavily skewed towards highly correlated, large-cap companies exposed to the cyclicality of global developed markets. The Wasatch strategy pursues wider country diversification and a greater focus on companies that are meeting home-country consumer demands.
The investment universe for this fund covers more than 30 countries and includes companies covering a typical market cap range of $3–20 billion. The majority of ideas are generated through industry contacts, researching competitors of existing holdings, the initial screening process, or company visits. Wasatch also takes advantage of ideas from its small-cap-focused portfolios that outgrow those mandates in what it terms ‘the graduation effect’. Frequently, members of this group that graduate out of the small-cap classification are neglected or poorly understood by analysts, offering otherwise missed opportunities to invest in successful, growing businesses.
The investment team adheres to four key criteria when considering adding any new position to the portfolio: financial quality; consistent, long-duration growth; exceptional and committed management; and a reasonable valuation. The focus on cash flow is evident in the high level of free cash flow growth and dividend growth from the portfolio versus the index over the long term.
Whilst valuation is important, Wasatch is fundamentally a growth investor. The team’s ability to identify businesses that have the ability to achieve sustainable, long-term growth is crucial to its success.
• High-conviction portfolio of 30–40 names with a typical weighting of around 3%
• Holds quality businesses regardless of the industry or region in which they operate
• Belief that the biggest risk management tool in the portfolio construction process is extensive due diligence
Ajay joined Wasatch as a research analyst in 1994 and has managed a number of strategies in his 25+ years of tenure. Today, Ajay is the lead portfolio manager for Wasatch’s emerging markets portfolio. Ajay received an MBA from Utah State University and completed his undergraduate degree at the University of Bombay where he read Physics and Mathematics.