Our Strategy
The Buffalo Funds' growth strategy combines the recognition of long term trends (demographic, technological, industrial) and rigorous fundamental research and analysis into a process for identifying "buy and hold" companies. We look for companies with little or no debt that can sustain and grow their market share and profit margins, have solid business models and management teams, and possess the ability to generate free cash flow even in tougher economic environments.
Asset classes include micro, small, mid, large and multi-cap equity, science & technology, multi-cap international equity and high yield fixed income. Available as no-load mutual funds, separately managed accounts and commingled funds.
The Buffalo Micro Cap, Small Cap, Mid Cap, Large Cap and Science & Technology Funds all follow a common growth strategy. The first step of the strategy involves the identification of positive, fundamental trends (demographic, technological, etc) that we believe will play out over a three to five period. These trends must be well defined and measurable. The goal of this strategy is to focus only on industries that will grow faster than the overall economy over the long-term. The second step consists of identifying the companies that can potentially benefit from the continuation of these trends. A valuation and business model analysis of each company is performed. This includes rigorous fundamental analysis which focuses on firms that have understandable business models, we believe can either sustain or grow their profit margins, have solid management teams, and have the financial strength to weather difficult economic environments. Our analysis includes visiting our companies and detailed written reports on each of our holdings. Finally, a proprietary and disciplined valuation methodology is performed to determine the level and timing of purchases and sales.
The Buffalo Growth Fund is differentiated from other funds in that it invests in U.S. based companies that appear poised to benefit from global growth trends. We seek well positioned and well managed U.S. growth companies that stand to benefit from international expansion and emerging markets' growth. We believe that U.S. based companies born into our free market economy and honed by the capitalistic process produce products and services that compete extremely well in global markets. And, on a long term basis, we believe that the emerging markets are going to be a significant driver of global GDP growth. This should enable select US companies to benefit from global infrastructure growth and the emerging middle classes in foreign markets. The Buffalo Growth Fund is designed for investors who want to participate in global expansion but would prefer to invest in US companies.
The Buffalo Balanced Fund is run using an income and growth strategy. The majority of equities chosen are income and/or value oriented. Bonds held in the fund are primarily high yield corporates and convertibles (most of which are held in the Buffalo High Yield Fund as well).
The Buffalo High Yield Fund invests in a mix of high yielding corporate and convertible bonds. The fund's core holdings are established in industries with favorable long-term trends. The portfolio manager then supplements core holdings with contrarian research/purchase of companies/industries that have fallen deeply out of favor. The manager and high-yield research staff looks to identify securities with attractive yields and valuations, and then performs thorough industry and company-specific credit analysis. The primary focus is on companies with bond ratings in the "B", "BB", and "BBB" categories as noted on S&P's rating scale. The Fund's sector/industry weightings are based entirely on independent research and are not tied to weightings of any index. Returns are generated by building portfolios that combine high yielding corporate and convertible securities (generally a 75/25% mix, dependent on market conditions). The fund will hold, add to, or sell based on changes in relative value, credit quality, market or industry conditions, economic or credit market conditions.
The investment objective for the Buffalo China Fund is long-term growth of capital. To pursue its investment objective, the Fund invests in securities of "China Companies," defined as companies that are organized under the laws of, or with a principal office in, the People's Republic of China, including Hong Kong; or whose principal trading market is in China; or that have significant operations or production in China, Hong Kong or Taiwan; or that derive at least 50% of their revenues or profits from goods sold or produced, investments made, or services performed in China, or have at least 50% of their assets in China.
The Buffalo China Fund will utilize a bottom-up investment approach, focusing on a company's fundamental valuation with a value-orientation and long-term horizon. The Fund will seek to invest in companies with strong profits and/or cash flow generation; strong growth potential; undervalued assets; and/or strong management teams. The Fund intends to invest in companies that are trading below their intrinsic values, as determined by the Fund's portfolio managers.
The strategy of the Buffalo International Fund is to identify non-US, high-quality growth companies that we expect to benefit from longer-term industry, technological, global or other trends. This list of trends is an "expanded" version of the trends we have identified for our US equity investments. Similar to our US funds, we will also invest based on fundamental analysis of industries and the economic cycle, company-specific analysis such as product cycles and quality of management, and rigorous valuation analysis.
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