The Wasatch U.S. Select Fund demonstrated strong performance in the fourth quarter, exceeding its benchmark despite a challenging market. This success was largely attributed to the robust performance of its information technology sector investments and specific key holdings. The Fund's strategic positioning and careful selection of companies, especially within the tech industry, allowed it to mitigate broader market declines and deliver superior returns to its investors. This highlights the importance of active management and sector-specific expertise in navigating volatile market conditions.
For the fourth quarter, the Wasatch U.S. Select Fund—Investor Class (WAUSX) experienced a negative return of -3.36%. Despite this decline, the Fund managed to outperform its benchmark, the Russell Midcap® Growth Index, which recorded a larger decline of -3.70% during the same period. This indicates a relative strength in the Fund’s holdings compared to the broader market for mid-cap growth stocks. The primary driver of this outperformance was the resilience shown by the Fund's investments within the information technology sector. While these holdings also faced some decline, their performance was significantly better than that of their counterparts in the benchmark. This suggests that the Fund's selection of technology companies was more robust or better positioned to withstand market pressures. Additionally, Fabrinet was noted as a top contributor to the Fund's overall performance during the fourth quarter, underscoring the impact of individual company strength on portfolio returns. The ability of the Fund to limit losses and outperform in a down market quarter demonstrates effective portfolio management and strategic asset allocation.
Fund Performance in Q4
In the final quarter of the year, the Wasatch U.S. Select Fund showed a notable ability to outperform its benchmark, even as the broader market for mid-cap growth stocks faced headwinds. The Fund's investments in the information technology sector played a critical role, demonstrating a resilience that helped cushion the overall portfolio against sharper declines experienced elsewhere. This strategic positioning meant that while some holdings did experience negative returns, their relative strength prevented a more significant drawdown for the Fund as a whole. Such performance underscores the value of diligent stock selection and sector allocation in preserving capital during periods of market volatility, highlighting the Fund's capacity to navigate challenging economic landscapes effectively.
During the fourth quarter, the Russell Midcap® Growth Index, a key benchmark for mid-sized growth companies, concluded the period with a downturn of -3.70%. In contrast, the Wasatch U.S. Select Fund—Investor Class (WAUSX) also registered a negative return, but at a more favorable -3.36%, thereby surpassing the benchmark's performance. This outperformance is largely attributable to the commendable resilience of the Fund's holdings within the information technology sector. Although these technology investments experienced a decline, their drop was considerably less severe than that of comparable companies within the benchmark, showcasing their relative strength. A specific highlight of the quarter was Fabrinet, which emerged as the leading contributor to the Fund's positive relative performance. The strategic allocation to and selection of companies like Fabrinet within the information technology sector proved instrumental in the Fund's ability to mitigate losses and achieve a better outcome compared to its market reference point.
Key Drivers of Outperformance
The Wasatch U.S. Select Fund's impressive outperformance during the fourth quarter was primarily due to the exceptional resilience of its holdings within the information technology sector. These companies, carefully selected by the Fund, exhibited greater stability and suffered less significant declines compared to their peers in the benchmark index. This strategic advantage was further amplified by the strong contribution of specific investments, such as Fabrinet, which played a crucial role in bolstering the Fund's overall returns. The disciplined investment approach and focus on high-quality, resilient companies within growth sectors proved to be a successful strategy in a challenging market environment, allowing the Fund to distinguish itself positively against its competitors.
The Wasatch U.S. Select Fund’s ability to surpass the Russell Midcap® Growth Index in the fourth quarter, despite both recording negative returns, was primarily underpinned by the robust performance of its investments in the information technology sector. While the technology sector generally faced a downturn, the specific companies held by the Fund demonstrated a notable capacity to withstand market pressures more effectively than their benchmark counterparts. This suggests a meticulous selection process that prioritized companies with strong fundamentals and resilience to economic fluctuations. Beyond sector-wide trends, individual stock contributions were also significant, with Fabrinet being identified as the foremost positive influence on the Fund's performance during this period. The company's strength helped offset some of the broader market weaknesses, illustrating the impact of concentrated, high-convation holdings. This strategic differentiation in stock selection within a pivotal sector allowed the Wasatch U.S. Select Fund to navigate a challenging quarter more successfully, underscoring the importance of active management in generating relative returns.