Overview
- Wasatch’s Q2 2026 Small Cap Growth Strategy letter reports the fund trailed the Russell 2000® Growth Index after the benchmark climbed 25.71% on a narrow group of AI‑linked winners.
- JFrog was the top contributor after reporting results that beat estimates, raising 2026 guidance, and saying first‑quarter cloud revenue grew about 50% year‑over‑year as customers used AI coding agents.
- AAON delivered strong gains based on data‑center cooling demand, posting over 50% year‑over‑year net sales growth and a 107.4% increase in backlog to a record $2.1 billion.
- The Ensign Group was the largest detractor after a short‑seller report questioned quality‑of‑care metrics, staffing and related‑party deals; Wasatch says it spoke with management and continues to hold the stock.
- Wasatch and other active managers face pressure from the concentrated AI leadership to balance chasing high‑momentum names with sticking to durable, profitable business models while hedge‑fund holdings showed only modest Q1 shifts.