Quick Facts
InvestorInstitutional
Ticker:BUFOXBUIOX
Inception Date:5/21/20047/1/2019
Expense Ratio:1.50%1.35%
Total Net Assets:$84.02 Million  (7/1/19)
Category:Small Cap Growth
Benchmark:Morningstar U.S. Small Growth
Related Material:
   Fund Fact Sheet Q2 2019
   PM Commentary Q2 2019
   Summary Prospectus
Recent Media Coverage
Money Life with Chuck Jaffe
June 28, 2019

MarketWatch
February 7, 2019

Fund Objective & Investment Process
The investment objective of the Buffalo Emerging Opportunities Fund is long-term growth of capital. The Fund invests primarily in equity securities, consisting of a portfolio of between 50-70 domestic common stocks, preferred stocks, convertible securities, warrants and rights, of companies that, at the time of purchase by the Fund, have market capitalizations of $1.5 billion or less.

The Fund managers seek to identify companies for the Fund’s portfolio that are expected to experience growth based on the identification of long-term, measurable secular trends, and which, as a result, may have potential revenue growth in excess of the gross domestic product growth rate. Companies are screened using in-depth, in-house research to identify premier early-stage growth companies which generally demonstrate:

  • Strong management teams
  • Little or no debt
  • Potential for increasing free cash flow
  • Scalable business models with a competitive advantage
  • Potential for increasing margins
  • Attractive risk/reward given the market framework
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We believe investing in an actively-managed portfolio of premier, early-stage, growth companies could lead to growth of capital over time. We look for companies that could benefit from long-term industrial, technological, or general market trends, and are trading at what we view as attractive valuations.

Craig Richard, Portfolio Manager

Morningstar Rating

       

Overall Morningstar Rating™ of BUFOX based on risk-adjusted returns among 584 Small Growth funds as of 8/31/19.

Investment Style

Performance (%)

As of 8/31/193 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/21/04)
BUFFALO EMERGING OPPORTUNITIES FUND - Investor1.3019.48-4.3014.938.6515.159.128.53
BUFFALO EMERGING OPPORTUNITIES FUND - Institutional1.3119.57-4.1815.108.8015.329.288.69
  Morningstar U.S. Small Growth Index5.7020.74-6.3812.819.4513.8210.089.33
  Russell 2000 Growth Index4.0616.30-11.0210.628.0613.069.509.02
  Morningstar Small Growth Category3.9818.37-7.9112.438.9313.189.528.38
As of 6/30/193 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/21/04)
BUFFALO EMERGING OPPORTUNITIES FUND - Investor6.8024.836.5920.158.7717.038.808.94
BUFFALO EMERGING OPPORTUNITIES FUND - Institutional6.8424.926.7520.338.9317.218.969.10
  Morningstar U.S. Small Growth Index2.4722.383.4715.789.5014.849.099.54
  Russell 2000 Growth Index2.7520.36-0.4914.698.6314.418.909.37
  Morningstar Small Growth Category4.1221.823.2216.129.1814.478.978.69
For performance prior to 7/1/19 (Inception Date of Institutional Class), performance of the Investor Class shares is used and includes expenses not applicable and lower than those of Investor Class shares.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 obtained here. Performance is annualized for periods greater than 1 year. Each Morningstar category average represents a universe of funds with similar objectives.
3 Year Risk Metrics
BUFOX vs Morningstar U.S. Small Growth Index (As of 6/30/19)
Upside Capture106.78
Downside Capture88.77
Alpha6.26
Beta0.84
Sharpe Ratio1.20
Hypothetical Growth of $10,000
This chart illustrates the performance of a hypothetical $10,000 investment made in the Fund on the Inception Date. Assumes reinvestment of dividends and capital gains. This chart does not imply future performance.

Portfolio

Portfolio Characteristics
(As of 6/30/19) 
 
# of Holdings68
Median Market Cap$1.11 B
Weighted Average Market Cap$1.55 B
3-Yr Annualized Turnover Ratio49.74%
% of Holdings with Free Cash Flow50.00%
% of Holdings with No Net Debt48.53%
Active Share94.84%
Top 10 Holdings
HoldingTickerSector% of Net
Assets
Kornit DigitalKRNTIndustrials3.33%
8x8EGHTCommunications3.15%
Hamilton LaneHLNEFinancials2.96%
CardlyticsCDLXTechnology2.82%
MimecastMIMETechnology2.70%
CyberArk SoftwareCYBRTechnology2.68%
Kinsale Capital GroupKNSLFinancial Services2.62%
Community Healthcare TrustCHCTReal Estate2.60%
EnvestnetENVTechnology2.37%
i3 VerticalsIIIVTechnology2.28%
TOP 10 HOLDINGS TOTAL27.51%
As of 6/30/19. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Fund holdings are subject to change and are not recommendations to buy or sell any securities.
Sector Weighting
As of 6/30/19. Security weightings are subject to change and are not recommendations to buy or sell any securities. Sector Allocation may not equal 100% due to rounding.
Market Capitalization
As of 6/30/19. Market Cap percentages may not equal 100% due to rounding.

Management

Craig Richard, CFA
Portfolio Manager

17 Years of Experience

 View full bio

Doug Cartwright, CFA
Portfolio Manager

13 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW
(As of 6/30/19) — The S&P 500 Index posted its best 1st half of a calendar year since 1997, rising 18.54% from January 1 to June 30. During the most recent quarter, the index was in negative territory for the first two months (April and May) then rose 7.05% in the final month, marking the best June since 1955, and finished with a return of 4.30% for the quarter.

Central banks and trade policies continued to drive financial markets during the period. The threat of increasing tariffs against China and Mexico contributed to the sell-off early in the quarter, and the June rally was largely a result of dovish central bank commentary, leading investors to anticipate rate cuts in the coming months.

The Russell 3000 Index returned 4.10% in the quarter. By style, growth outpaced value, with the Russell 3000 Growth Index up 4.50% and the Russell 3000 Value Index up 3.68%. Large caps generally outperformed small caps in the quarter. The Russell 1000 Index returned 4.25%, just ahead of the Russell Mid Cap Index return of 4.13%. The Russell 2000 returned 2.10% during the quarter. Financials were the best performing sector, followed by Materials and Information Technology. Energy was the only sector to post a negative return, driven by a decline in oil prices. Health Care and Real Estate also underperformed relative to the broad market.

PERFORMANCE COMMENTARY
(As of 6/30/19) — The Buffalo Emerging Opportunities Fund (the “Fund”) posted a return of 6.80% for the quarter ending June 30, 2019. This compares to the Morningstar U.S. Small Growth Index’s (the “Index”) gain of 2.47%. During the past 12 months, the Fund changed its primary benchmark to the Morningstar U.S. Small Cap Growth Index from the Russell 2000 Growth Index, which returned 2.75% in the quarter. The strong start to the calendar year has resulted in the Fund returning 24.83% year-to-date compared to the index return of 22.38%. All benchmark sectors are showing positive returns led by those companies at the largest end of the market cap spectrum within the small cap growth universe. Those with the highest sales growth rates have produced the best absolute returns.

The Fund’s outperformance in the quarter compared to the Index was primarily due to stock selection within the Industrials and Information Technology sectors. These two sectors remain the largest weightings of the Fund’s assets. Industrials returned 19.29% on average for the portfolio in the quarter while the Fund’s Technology holdings gained 7.38%. These results outpaced the benchmark’s average returns of 11.21% and 1.19% in these two sectors, respectively.

Two leading contributors to returns during the period were Kratos Defense & Security Solutions and Amber Road. Kratos is a government defense contractor, with a focus on delivering sophisticated technology at an affordable cost. The company is a leading provider of jet powered drones that can be used for targeting practice (training for missile defense and fighter pilot training) along with emerging production of tactical drones. The tactical drone opportunity is attractive for the U.S. government given the potential to augment or replace expensive fighter planes – typically costing $100 million or more – with $2-3 million unmanned aircraft with similar capabilities.

Shares of Amber Road rose in the quarter on news that it is an acquisition target of a larger peer. Amber Road is a software company aimed at helping importers and exporters deal with the complexity of global logistics including tariffs, duties, logistics, trade compliance, etc. While Amber Road offers a leading software solution for global trade management, the company has struggled to execute on the sales and marketing front over the past several years. We believed the inherent value of the company’s technology was worth more than what was reflected in the share price and were pleased to realize the enhanced value that was unlocked through the buyout.

OUTLOOK
(As of 6/30/19) — The U.S. Federal Reserve remains at the ready to bolster the domestic economy and the stock market through potential interest rate cuts in the coming weeks and months. This has proven to be a supportive back drop for the stock market for the past 10 years. That said, we operate on the small end of the small cap growth spectrum and continue to seek companies that can sustain growth regardless of market headlines, as a result of secular growth trends or due to the innovation and disruption they are introducing to an industry. As always, we will be playing close attention to the valuations of the portfolio’s holdings and will utilize market volatility to add to or trim investments as risk/reward profiles improve or degrade.

The Buffalo Emerging Opportunities Fund is primarily focused on identifying innovation among U.S.-based companies with North American revenue bases. We continue to look for prudent ways to deploy cash, and we remain long-term focused, aiming to be shrewd when the market environment presents opportunity and more cautious when it does not. With an active share greater than 95%, the Fund will continue to offer a distinct offering from the Index and peers.

The opinions expressed are those of the Portfolio Manager(s) and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security. Earnings growth is not representative of the fund’s future performance.

Literature

General Account
Forms
Investor
Class
Institutional
Class
Both
  New Account Application
  New Account Application - Entity
  Change or Add Account Details
  Cost Basis Method Election
  Power of Attorney
Individual Retirement Account (IRA) Forms
  IRA Account Application
  IRA Beneficiary Addition / Change
  IRA Required Minimum Distribution (RMD)
  IRA / Qualified Plan Distribution Request
  IRA Transfer
Coverdell Education Savings Accounts (ESA) Forms
  Coverdell ESA Application
  Coverdell ESA Distribution Request
  Coverdell ESA Transfer
Retirement Information
  Retirement Savings Options for Individuals

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.

The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating™ for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating™ metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The Buffalo Emerging Opportunities Fund (BUFOX) received 4 stars among 584 for the three-year, 3 stars among 521 for the five-year, and 4 stars among 399 Small Growth funds for the ten-year period ending 8/31/19.

In each Morningstar Category, the 10% of funds with the lowest measured risk are described as Low Risk, the next 22.5% Below Average, the middle 35% Average, the next 22.5% Above Average, and the top 10% High. Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund. Funds with less than three years of performance history are not rated. ©2019 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Morningstar Style Box™ reveals a fund’s investment strategy by showing its investment style and market capitalization based on the fund’s portfolio holdings.