Overview
U.S. stocks continued to rally in the third quarter. The Federal Reserve’s interest rate cut helped buoy stocks, as did economic data showing that, while there may be some pockets of concern, the U.S. economy remained steady. In this environment, the Russell Midcap® Growth Index was up 2.78%. The Wasatch U.S. Select Fund—Investor Class did not keep pace and finished the period down -1.93%.
We owned a handful of stocks that fell during the period. Given the concentrated nature of the Fund, those holdings had a large effect on results. A few of the companies reported slower revenue growth and their stocks were down substantially. For most of those companies, investors seemed to be debating whether the slowdown was due to the macroeconomic environment or to competitive pressures.
We have worked through that same debate. One of the ways in which we monitor whether the growth potential and quality of a company is still intact is through our “critical questions.” For every company in which we invest, we create two or three critical questions designed to capture long-term insights about the business that if we knew the answer today would cause us to significantly change our position. These questions help us focus our research on where we think the company could be in five or 10 years.
For Fund holdings that detracted from quarterly performance, we reviewed our critical questions again. Although we sold a few stocks, we believe the long-term investment thesis remains intact for most of the holdings that detracted from performance.
Another reason the Fund underperformed is because, in much of our coverage universe, stocks of low-quality companies have been in favor. This is a direct headwind for our investment process, which seeks to identify high- quality, long-duration growth companies. We can’t predict when the period favoring low-quality companies will end. But periods of outperformance by low-quality stocks have historically been short-lived. The stocks of high-quality businesses have outperformed over the long term. We believe that will continue to be the case.
Details of The Quarter
BellRing Brands, Inc. (BRBR) was the largest detractor from Fund performance during the quarter. BellRing is a consumer-staples company known for its Premier Protein line and other convenient-nutrition products. What’s weighed on the stock most is that one of BellRing’s club channel partners is expanding the floor space of the protein shake category and giving some space to other competitors. We spoke with management after that news and reevaluated the business. We came out of that work with continued conviction in the company. We believe BellRing has maintained its leadership position, and that this floor space expansion reflects the health of the category. Looking ahead, we continue to believe BellRing has headroom to double its business, supported by category growth, sourcing share from incumbent brands, and remaining a leader in its space.
Another detractor was Shift4 Payments, Inc. (FOUR). A longtime holding in many of our small-cap funds, Shift4 provides payment processing solutions for hospitality, retail, and e‑commerce businesses. Fundamentals for the company remain solid, as organic revenues grew in the high-teens percentages in the most recent quarter. But the stock has been down in part due to concerns about how a softer macroeconomic environment could affect the company. Additionally, investor sentiment on the company became less favorable after its acquisition of Global Blue, which is a foray into a new customer segment for Shift4. The acquisition also means the company is taking on more debt. Acquisitions can sometimes cause investors angst since they take time to integrate into a company’s normal operations. However, we have confidence in Shift4’s leadership and their ability to execute on Global Blue.
Inspire Medical Systems, Inc. (INSP) also detracted. This is an example of a company for which we reviewed the investment thesis and decided to move on. We sold the position during the quarter. Inspire develops implantable neurostimulators for treating obstructive sleep apnea. The company’s share price declined in August after management downgraded full-year 2025 guidance due to delays in the U.S. commercial rollout of its next- generation InspireV system. The delayed rollout of InspireV raised questions about execution by management. Additionally, concerns are growing about how GLP-1 drugs may affect Inspire’s addressable market.
Medpace Holdings, Inc. (MEDP) was the top contributor to Fund performance. The contract research organization provides drug development, clinical trial management, and regulatory services to biotech, pharmaceutical and medical-device companies. Medpace shares jumped after management reported strong revenue and earnings growth and raised full-year guidance. We believe the company’s results are particularly impressive in light of the fact that there’s been a slowdown in the biotech funding cycle.
Another top contributor was Fabrinet (FN). The company designs, manufactures and tests complex optoelectronic and photonic components, modules, and precision optical assemblies for customers in a variety of industries. Some of Fabrinet’s products are used in data centers, which ties the company somewhat to artificial intelligence (AI). AI has been a popular theme among investors, and likely helped drive the stock higher. However, we don’t hold Fabrinet’s stock as a thematic play on AI. The company is experiencing strong adoption of its products by both new and existing customers. We believe it’s well positioned to grow regardless of AI.
Nova Ltd. (NVMI) also contributed. Nova sells metrology and process control systems used in semiconductor manufacturing. Like Fabrinet, the firm benefits from the increasing use of AI. Nova’s ties to the AI theme likely helped lift the stock during the quarter. But here too, we aren’t investing in Nova as part of a thematic view, and we don’t view it as a speculative business. The company has a strong track record of earnings growth, in our view, and we believe its products will continue to be in high demand as semiconductor manufacturing becomes more complex. (Current and future holdings are subject to risk and change.)
Outlook
While we were disappointed with the Fund’s performance this quarter, we aren’t deviating from our investment process. During Wasatch’s 50-year history, we’ve learned the importance of staying committed to our philosophy and process, as opposed to chasing what’s currently “working” in the market. We’ll always do our best to be open- minded about new opportunities that could unfold, but we’ll stay true to our discipline of finding high-quality, long- duration growth companies.
As we look across the Fund, we remain encouraged by the fundamentals of our companies, and by the high- quality nature of these businesses. Earnings growth for most companies held by the Fund remains strong. This makes us excited about the Fund’s return potential over a three- to five-year time horizon.
Thank you for the opportunity to manage your assets.
Sincerely,
Mike Valentine, Paul Lambert, Austin Bone and Mick Rasmussen
SEPTEMBER 30, 2025 PORTFOLIO MANAGERS
| Name | Title | Years On Fund | Years At Wasatch |
|---|---|---|---|
| Mike Valentine | Portfolio Manager | 3 | 9 |
| Paul Lambert | Portfolio Manager | 3 | 25 |
| Austin Bone | Portfolio Manager | 3 | 9 |
| Mick Rasmussen | Portfolio Manager | 3 | 11 |
TOTAL RETURNS FOR PERIODS ENDED SEPTEMBER 30, 2025
| Quarter* | 1 Year | 3 Years | 5 Years | Since Inception** | |
|---|---|---|---|---|---|
| U.S. Select Fund-Investor | -1.93% | -0.90% | 15.94% | N/A | 13.49% |
| U.S. Select Fund-Institutional | -1.92% | -0.77% | 16.14% | N/A | 13.63% |
| Russell Midcap® Growth Index+ | 2.78% | 22.02% | 22.85% | N/A | 21.12% |
| Russell 3000® Growth Index ++ | 10.41% | 24.79% | 30.76% | N/A | 27.28% |
| *Returns less than one year are not annualized.**The Wasatch U.S. Select Fund’s inception date was June 13, 2022.The performance data quoted represents past performance. Past performance does not guarantee future results. Information in this document regarding market or economic trends, or the factors influencing historical or future performance, reflects the opinions of management as of the date of this document. These statements should not be relied upon for any other purpose. Current performance may be lower or higher than the data quoted. To obtain the most recent month-end performance data available, please visit wasatchglobal. com. The Advisor may absorb certain Fund expenses, without which total returns would have been lower. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost.Total Expense Ratio: Investor Class—Gross 1.75%, Net 1.01% / Institutional Class—Gross 1.26%, Net 0.86% Total Annual Fund Operating Expenses include operating expenses, including the management fee, before any expense reimbursements by the Advisor. The Advisor has contractually agreed to limit certain expenses to 1.00% for the Investor Class and 0.85% for the Institutional Class through at least 1/31/2026. See the prospectus for additional information regarding Fund expenses. Wasatch Funds will deduct a 2.00% redemption fee on Fund shares held 60 days or less. The performance data does not reflect the deduction of fees or taxes, which if reflected, would reduce the performance quoted.For more complete information including charges, risks and expenses, read the prospectus carefully. Investing in small cap funds will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. Investing in foreign securities, especially in emerging markets, entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus. Being non-diversified, the Fund can invest a larger portion of its assets in the stocks of a limited number of companies than a diversified fund. Non-diversification increases the risk of loss to the Fund if the values of these securities decline. An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, containing this and other information, visit wasatchglobal. com or call 800.551.1700. Please read the prospectus carefully before investing. The Wasatch U.S. Select Fund’s investment objective is long-term growth of capital.
† The Russell Midcap Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values.†† The Russell 3000 Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values. Indexes are unmanaged. Investors cannot invest directly in an index. The Wasatch U.S. Select Fund has been developed solely by Wasatch Global Investors. The Wasatch U.S. Select Fund is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the Russell indexes vest in the relevant LSE Group company, which owns these indexes. Russell ® is a trademark of the relevant LSE Group company and is used by any other LSE Group company under license. These indexes are calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (A) the use of, reliance on or any error in these indexes or (B) investment in or operation of the Wasatch U.S. Select Fund or the suitability of these indexes for the purpose to which they are being put by Wasatch Global Investors. Earnings growth is a measure of growth in a company’s net income over a specific period, often one year. Revenue growth is the increase in a company’s revenues over a specified period of time, not necessarily one year. U. S. SELECT FUND — TOP 10 HOLDINGS AS OF JUNE 30, 2025
Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Fund or its Advisor. Current and future holdings are subject to risk. Wasatch Funds are distributed by ALPS Distributors, Inc. 1/30/2026 |
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