Market Sentiment vs Fundamentals

Market Sentiment vs Fundamentals

Market Sentiment vs Fundamentals

Above-average GDP growth, a robust job market, and double-digit earnings growth are some of the fundamentals that indicate current economic conditions are still fairly strong. However, the biggest threat to the economy is arguably investor confidence itself.

We all know investing isn’t about the day-to-day swings of the market – it’s about long-term performance. Of course that doesn’t stop us from compulsively checking our news feeds throughout the day for the latest headlines.

With all the recent volatility, the belief that the market is in a tailspin and it’s time to pull out is widespread. Financial Times reports that investor expectations are softening not just in the U.S., but also internationally. However, the belief that the stock market is no longer bearing any fruit just isn’t justified.

To prove that’s the case, we take a look at how the stock market and the economy as a whole are actually fairing. In this latest report from the Buffalo Funds, we discuss:

  • Setting sentiments aside and focusing on the fundamentals
  • Looking for the bright spots in the market
  • Be cautious of passive strategies during market volatility
  • Don’t be afraid to go against the herd

“If the underlying fundamentals of the companies in a fund’s portfolio are solid, there’s no reason to back out of a good fund.”

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. 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.

Fundamental Approach

We get to know the companies we invest in and learn how they run their business.

Top-Down & Bottom-Up

We identify Top-Down broad, secular growth trends and search for companies from the Bottom-Up.

Proprietary Philosophy

We construct our portfolios based on our own proprietary investment strategy.

Disciplined Investing

Sticking to our disciplined investment strategy ensures we maintain a consistent, balanced approach.

“Industry Perspectives” 4Q 2018

“Industry Perspectives” 4Q 2018

“Industry Perspectives” 4Q 2018

Home > Insights & News > White Papers & Research > Industry Perspectives 4Q 2018

Download our latest "Industry Perspectives"

 

Read our view on the economy and key drivers of change in the global equity markets.

Date Published:
January 2019

Pages:
4

OVERVIEW:
Worries about rising interest rates, the continuing trade friction between the U.S. and China, and geopolitical tensions tempered risk appetites among investors in the 4th quarter. For the first time since The Great Recession of 2008, the S&P 500 Index posted a loss for the year.

In this latest Industry Perspectives, we discuss:

  • Machine-trading, models, and passive investing formulas have created a herd
    mentality, which in turn contributed to the recent market volatility.
  • Companies will have to find other ways to provide earnings growth this year, following 2018’s one-time benefit, produced by the sweeping corporate tax cut.
  • The condition of the global economy and the resolution of trade disputes are two critical factors impacting stock prices and the probability of positive returns for 2019 in our view.

Fundamental Approach

We get to know the companies we invest in and learn how they run their business.

Top-Down & Bottom-Up

We identify Top-Down broad, secular growth trends and search for companies from the Bottom-Up.

Proprietary Philosophy

We construct our portfolios based on our own proprietary investment strategy.

Disciplined Investing

Sticking to our disciplined investment strategy ensures we maintain a consistent, balanced approach.

Sign Up for Automatic Updates

Stay up-to-date with the most recent media coverage and press releases about the Buffalo Funds.

FOR FINANCIAL PROFESSIONALS

Terms of Use – Email lists are created for use by U.S. investment professionals only and are published strictly for informational purposes. Providing access to the content of these emails does not explicitly or implicitly constitute a solicitation of services or products of the Buffalo Funds, Kornitzer Capital Management, or any of their affiliates. The information contained in the emails is not intended for distribution to, or for use by, investment professionals in a jurisdiction where distribution or purchase is not authorized. The information contained in these emails is not appropriate for use by individual investors. By registering for any of these emails, you agree to Buffalo's terms and conditions and that you are qualified as an institutional investor or otherwise member of a registered broker/dealer, registered investment advisor, or investment consulting firm.

FOR INDIVIDUAL INVESTORS

Bear Markets & Client Expectations Copy

Bear Markets & Client Expectations Copy

Bear Markets & Client Expectations Copy

Various factors, including increasing volatility, a softening housing market, risks of a trade war, and the sheer length of this nearly decade-long bull market, suggest a major correction or recession could be near.

Setting expectations now will help shepherd clients through the next market downturn. With the right strategy and mindset, financial advisors can use market downturns to their advantage, strengthening their clients’ trust in them.

However, it takes two consecutive quarters of negative growth to confirm that the economy is in a recession. By the time we know we’re in one, it’s probably too late to do much about it, in terms of portfolio positioning. That’s why it is essential to prepare in advance.

In this latest white paper from the Buffalo Funds, we discuss the following concepts:

  • Clients should focus on time in the market, not market timing
  • Bull or bear, no market lasts forever
  • Coaching vs. teaching clients
  • Communication as the foundation for your value proposition
  • Control what you can (risks, costs, emotions) and less on returns

“Great advisors know that clients reward those who can manage their investments, their expectations, and their emotions.”

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.

Fundamental Approach

We get to know the companies we invest in and learn how they run their business.

Top-Down & Bottom-Up

We identify Top-Down broad, secular growth trends and search for companies from the Bottom-Up.

Proprietary Philosophy

We construct our portfolios based on our own proprietary investment strategy.

Disciplined Investing

Sticking to our disciplined investment strategy ensures we maintain a consistent, balanced approach.

How a Small-Cap Fund Manager is Handling a Ruthless Period in the Stock Market

How a Small-Cap Fund Manager is Handling a Ruthless Period in the Stock Market

Media Coverage

How a Small-Cap Fund Manager is Handling a Ruthless Period in the Stock Market

Overview

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 YR3 YR5 YR10 YR
Buffalo Small Cap Fund9.6012.755.5014.78
Russell 2000 Price Return Index2.739.736.4812.84
Russell 2000 Total Return Index4.0611.267.9314.41

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

HIGHLIGHT

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.

MEDIA CONTACT

Joel Crampton
Director of Marketing
(913) 647-9881
Email

Featured Articles


Focusing on Midcaps with Secular Growth Tailwinds

Focusing on Midcaps with Secular Growth Tailwinds

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.

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.

“Industry Perspectives” 3Q 2018

“Industry Perspectives” 3Q 2018

“Industry Perspectives” 3Q 2018

Home > Insights & News > White Papers & Research > Industry Perspectives 3Q 2018

Download our latest "Industry Perspectives"

 

Read our view on the economy and key drivers of change in the global equity markets.

Date Published:
October 2018

Pages:
3

OVERVIEW:
With the holiday season quickly approaching, this is a positive indicator for consumer spending and could help the markets finish the year strong. However, the disparity between growth stocks and value stocks is perhaps the most glaring factor that could impact investors’ portfolio performance over the next 18 months.

In this latest Industry Perspectives, we discuss:

  • The Federal Reserve is continuing to raise interest rates and reduce its balance sheet in order to “normalize” the markets.
  • Europe’s uncertainty heading into 2019 and the ongoing volley of tariffs and trade disputes could impact the Fed’s estimated trajectory of the U.S. economy.
  • The disparity between growth stocks and value stocks is perhaps the most glaring factor that could impact investors’ portfolio performance over the next 18 months.

Fundamental Approach

We get to know the companies we invest in and learn how they run their business.

Top-Down & Bottom-Up

We identify Top-Down broad, secular growth trends and search for companies from the Bottom-Up.

Proprietary Philosophy

We construct our portfolios based on our own proprietary investment strategy.

Disciplined Investing

Sticking to our disciplined investment strategy ensures we maintain a consistent, balanced approach.

Sign Up for Automatic Updates

Stay up-to-date with the most recent media coverage and press releases about the Buffalo Funds.

FOR FINANCIAL PROFESSIONALS

Terms of Use – Email lists are created for use by U.S. investment professionals only and are published strictly for informational purposes. Providing access to the content of these emails does not explicitly or implicitly constitute a solicitation of services or products of the Buffalo Funds, Kornitzer Capital Management, or any of their affiliates. The information contained in the emails is not intended for distribution to, or for use by, investment professionals in a jurisdiction where distribution or purchase is not authorized. The information contained in these emails is not appropriate for use by individual investors. By registering for any of these emails, you agree to Buffalo's terms and conditions and that you are qualified as an institutional investor or otherwise member of a registered broker/dealer, registered investment advisor, or investment consulting firm.

FOR INDIVIDUAL INVESTORS

The Case for Investing Internationally

The Case for Investing Internationally

The Case for Investing Internationally

“International equities appear ready to take a leadership role, and the international market cycle has a long recovery ahead.”

Based on a multitude of global market factors, including cheaper valuations in international stocks and an accommodative credit cycle in global markets, we believe now is the time for investors to rethink international equity exposure and consider increasing international stock allocations.

However, due to a lack of insight and a bias towards domestic U.S. stocks, many investors only allocate a minimal exposure to the international equities asset class when devising an investment plan.

In this report, we provide insights into several areas that show the potential for increasing returns of international stocks over the long term:

  • Impact of trade war rhetoric and actions
  • Economic cycles and global gross domestic product trends
  • Credit cycles and monetary policy
  • Relative valuations for international stocks

“With the potentially faster pace of global economic growth overseas, we believe now is the right time to rethink international equity exposure.”

Bill Kornitzer, CFA, has 26 years of professional investment experience, including portfolio management of the Buffalo International Fund (BUFIX) since the Fund’s inception in 2007.

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.

Fundamental Approach

We get to know the companies we invest in and learn how they run their business.

Top-Down & Bottom-Up

We identify Top-Down broad, secular growth trends and search for companies from the Bottom-Up.

Proprietary Philosophy

We construct our portfolios based on our own proprietary investment strategy.

Disciplined Investing

Sticking to our disciplined investment strategy ensures we maintain a consistent, balanced approach.