How a Small-Cap Fund Manager is Handling a Ruthless Period in the Stock Market
Buffalo Small Cap Fund co-portfolio manager Jamie Cuellar, CFA, was recently interviewed by Barron’s about the recent market downturn for small-company stocks. In the article, he describes the team’s approach to picking premier growth stocks based on in-depth analysis of company fundamentals and highlights the BUFSX team’s long-term investment philosophy that focuses less on short-term market movements.
“If anything, you’ve just got some better valuations for ideas you may have missed out on in the first place or something you’re really excited about.“ ~ Jamie Cuellar, CFA, Co-Portfolio Manager, Buffalo Small Cap Fund
In the interview, Jamie reviewed his career path to the Buffalo Funds and the changes he and his co-managers put in place for the portfolio to help improve the Fund’s investment strategy and valuation discipline.
The article also identifies several small-cap stocks in the BUFSX portfolio which illustrate the Fund’s investment process in action:
- Twilio – TWLO
- HealthEquity – HQY
- PROS Holdings – PRO
CLICK HERE to access the Barron’s article.
Diversification does not assure a profit, nor does it protect against a loss in a declining market. Past performance does not guarantee future results. Earnings growth is not representative of the fund’s future performance.
Opinions expressed are those of the author or Funds and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. References to other mutual funds should not to be considered an offer to buy or sell these securities. A complete list of the Fund’s holdings can be found here. Fund holdings are subject to change and should not be considered a recommendation to buy or sell any security.
Annualized Performance (%)
|(as of 11/16/18)||1 YR||3 YR||5 YR||10 YR|
|Buffalo Small Cap Fund||9.60||12.75||5.50||14.78|
|Russell 2000 Price Return Index||2.73||9.73||6.48||12.84|
|Russell 2000 Total Return Index||4.06||11.26||7.93||14.41|
The Buffalo Small Cap Fund expense ratio is 1.01%. The Barron’s article references Russell 2000 Price Return Index performance as of 11/16/18, instead of the commonly-used Russell 2000 Total Return Index. The price return is the rate of return on an investment portfolio, where the return measure takes into account only the capital appreciation of the portfolio, while the income generated by the assets in the portfolio, in the form of interest and dividends, is ignored. This contrasts with the total return, which does take into account the income generated in the portfolio.
Where the article references the “Buffalo Small Cap has out run the Russell 2000 by an average of two percentage points a year over the past decade,” the percentage difference between the Russell 2000 Price Return Index as of 11/16/18 (the date the article uses as a reference point for returns) was actually 1.68%. However, the 10-year outperformance of the Fund vs the Russell 2000 Price Return Index, averaged out across every day in 2018 up to 11/16/18, is 2.19%.
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower of higher than the performance quoted and can be found here; quarter-end performance can be found here. Performance is annualized for periods greater than 1 year.
BUFSX Portfolio Managers – Jamie Cuellar, Alex Hancock, Bob Male
Jamie Cuellar, BUFSX co-portfolio manager, discusses his team’s trend-spotting and portfolio-building strategies that have helped the Buffalo Small Cap Fund weather the recent market volatility.
Director of Marketing
Nicole Kornitzer (Buffalo International Fund co-PM) described her team’s top-down strategy of studying secular growth trends within the health care industry and identifies 3 companies which are well-positioned to benefit from these long-term trends.
Josh West and Chris Carter, Buffalo Mid Cap co-portfolio managers, discuss a variety of issues affecting their investment strategy, including the current interest rate environment, globalization, the growth of ESG investing, and Millennials.
Bill Kornitzer, BUFIX co-portfolio manager, discusses the accelerated pace of the growth of global economies outside the U.S. and why, given where valuations are today, there are many opportunities to invest internationally at this time.
Jamie Cuellar, co-portfolio manager, discusses his team’s analysis of small-cap company valuations and provides several examples of companies that highlight his team’s investment strategy at work.
Diversification does not assure a profit, nor does it protect against a loss in a declining market.
Active investing has higher management fees because of the manager’s increased level of involvement while passive investing has lower management and operating fees. Investing in both actively and passively managed mutual funds involves risk and principal loss is possible. Both actively and passively managed mutual funds generally have daily liquidity. There are no guarantees regarding the performance of actively and passively managed mutual funds. Actively managed mutual funds may have higher portfolio turnover than passively managed funds. Excessive turnover can limit returns and can incur capital gains.