The Wasatch Small Cap Growth Strategy returned -2.86% in Q2, trailing the Russell 2000 Growth Index. Alkami Technology and Arcosa led gains, but RxSight and tech picks weighed.
Alpha Score of 40 reflects weak overall profile with moderate momentum, poor value, moderate quality, moderate sentiment.
The Wasatch Small Cap Growth Strategy gave back 2.86% in the second quarter of 2026, trailing the Russell 2000 Growth Index’s 1.97% decline. Since its 2021 inception, the strategy has still compiled a 62.57% cumulative gain, ahead of the benchmark’s 48.72%.
Portfolio managers J.B. Taylor and Paul Lambert pinned the quarterly miss on stock selection in producer durables and technology. Those losses were partly offset by gains in consumer discretionary and healthcare, they wrote in the fund’s investor letter.
Top contributors and new positions
Alkami Technology (ALKT), a cloud-based digital banking platform, was the largest positive contributor. Shares jumped after the company reported strong new-client wins and raised its full-year revenue guidance. The stock is up more than 50% year-to-date.
Arcosa (ACA) and FormFactor (FORM) also added. Arcosa, which makes infrastructure and construction materials, benefited from rising demand for utility and road-building products. FormFactor, a semiconductor test-equipment maker, gained on chip demand tied to AI and data-center builds.
On the downside, RxSight (RXST) was the biggest detractor. The ophthalmic-device company fell after a competitor launched a new light-adjustable lens system. Taylor and Lambert said they still see a long runway for RxSight’s technology, citing its patent protection and installed base.
New positions added during the quarter included Intapp (INTT), which provides cloud-based software for professional services firms, and Inari Medical (NARI), a medical-device company focused on venous-thrombosis treatments. The managers said both have strong product cycles and expanding addressable markets.
The fund’s cash position was about 3% at quarter-end, near the low end of its typical range. That suggests conviction in the current opportunity set, the managers said.
Sector tilt and holding period
Taylor and Lambert said they continue to favor companies with durable competitive advantages and exposure to secular growth trends: digital transformation, healthcare innovation, and industrial automation. The portfolio remains overweight in technology and healthcare relative to the benchmark, and underweight in consumer staples and real estate.
The fund’s average holding period exceeds five years, the managers noted, reinforcing their focus on bottom-up stock selection rather than macro timing.
Small-cap growth funds broadly struggled in the second quarter as rising rates and a shift toward value stocks weighed on the category. The Russell 2000 Growth Index fell for the second straight quarter, and active managers in the space have posted mixed results. Wasatch’s underperformance, while narrow, reflects the challenge of stock-specific bets in a rate-sensitive environment.
The full investor letter, which includes detailed commentary on each top holding, is available to Wasatch clients.
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