Inception Date
  May 21, 2004

Total Fund Assets
  $92.83 Million  (6/30/18)

Expense Ratio

Benchmark Index
  Russell 2000 Growth


Overall Morningstar™ rating out of 606 Small Growth funds as of 6/30/18 (derived from a weighted average of the fund’s three-, five-, and ten-year risk adjusted return measure).


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.



Low High

The Morningstar™ Risk vs Category rating is an assessment of the variations in a fund’s monthly returns, with an emphasis on downside variations, in comparison to the 606 funds in the Small Growth category, as of 6/30/18.


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Investment Strategy

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.

While the Fund’s investments in equity securities will consist primarily of domestic securities, the Fund may also invest up to 20% of its net assets in sponsored or unsponsored ADRs and equity securities of foreign companies that are traded on U.S. stock exchanges.


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

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

Performance (%)

As of 6/30/183 MOYTD1 YR3 YR5 YR10 YRSince Inception
Buffalo Emerging Opportunities Fund9.6112.4821.7411.1511.5514.149.11
  Russell 2000 Growth Index7.239.7021.8610.6013.6511.2410.10
  Lipper Small Cap Growth Fund Index7.8912.3826.3311.7213.2210.589.33
  Lipper Micro Cap Funds Index9.349.1118.4910.9411.8310.328.72
  Morningstar Small Growth8.5311.0522.7011.0412.7610.859.08
As of 6/30/183 MOYTD1 YR3 YR5 YR10 YRSince Inception
Buffalo Emerging Opportunities Fund9.6112.4821.7411.1511.5514.149.11
  Russell 2000 Growth Index7.239.7021.8610.6013.6511.2410.10
  Lipper Small Cap Growth Fund Index7.8912.3826.3311.7213.2210.589.33
  Lipper Micro Cap Funds Index9.349.1118.4910.9411.8310.328.72
  Morningstar Small Growth8.5311.0522.7011.0412.7610.859.08
YearBuffalo Emerging OpportunitiesRussell 2000 Growth IndexMorningstar Small Growth Category
(As of 6/30/18)

vs Russell 2000 Growth Index
Upside Capture99.26
Downside Capture96.46
Sharpe Ratio0.68

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.

Growth of $10k

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.


(As of 6/30/18)

# of Holdings64
Median Market Cap$1.04 B
Weighted Average Market Cap$1.24 B
3-Yr Annualized Turnover Ratio68.50%
% of Holdings with Free Cash Flow45.31%
% of Holdings with No Net Debt35.94%
Active Share95.46%
HoldingTickerSector% of Net Assets
Community Healthcare TrustCHCTReal Estate2.72%
Nexeo SolutionsNXEOIndustrials2.49%
Motorcar Parts of AmericaMPAAConsumer Discretionary2.34%
Foundation Building MaterialsFBMIndustrials2.22%
Financial EnginesFNGNFinancial Services2.15%
Kinsale Capital GroupKNSLFinancial Services2.12%
EnvestnetENVFinancial Services1.99%
View Full Holdings

As of 3/31/18. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Those listed are for the previous quarter. Fund holdings are subject to change and are not recommendations to buy or sell any securities.

Buffalo publishes this listing of securities held as of the most recent calendar-quarter end, with a 30 or 60 day lag depending on the portfolio. Buffalo may exclude any portion of holdings from publication when deemed in the best interest of the portfolio.

The portfolio data and its presentation here may differ from the complete schedules of investments in regulatory filings due to differing accounting and reporting requirements.

As of 6/30/18. 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.

As of 6/30/18. Market Cap percentages may not equal 100% due to rounding.


Commentary for Q2 2018   (As of 6/30/18)


(As of 3/31/18) — The long streak of low volatility and positive stock market returns ended in the 1st quarter of 2018. Strong gains in January were erased in February and March, leaving the S&P 500 Index down 0.76% for the quarter. Volatility as measured by the Cboe Volatility Index (VIX) was up about 80% in the 1st quarter after falling for the last three years. Investor worries about increasing interest rates, possible trade wars, and threatened government action against large technology companies, offset generally strong economic data and corporate earnings growth.

The Russell 3000 Index declined 0.64% in the quarter, and, broadly speaking, small cap companies outperformed large cap companies during the period. The Russell Microcap Index advanced 0.68% and the Russell 2000 Index finished the period nearly flat, edging down just 0.08%. Moving up the market cap spectrum, performance worsened – the Russell Mid Cap Index was down 0.46% and the larger cap Russell 1000 Index declined 0.69%. Growth outperformed value by a wide margin during the quarter as the Russell 3000 Growth Index advanced 1.48% compared to a decline of 2.82% for the Russell 3000 Value Index. Technology and Consumer Discretionary were the best performing sectors, while Consumer Staples and Energy were the worst performing.


(As of 3/31/18) — The Buffalo Emerging Opportunities Fund posted a positive return of 2.62% in the quarter, outperforming the Russell 2000 Growth Index return of 2.30%. The Index, which is a proxy for domestic small capitalization (small cap) growth companies, was one of the top performers across all domestic equity categories to begin the year.

While posting positive returns for the full period, the Index did see a return of market volatility that had been absent throughout last year, as the market advanced almost consistently in 2017.

During the 1st quarter, the Index posted daily returns of greater than 0.5% or less than -0.5% on 39 out of 61 trading days, about 64% of the time. The Index also saw the market deliver a daily sell-off of more than 2.0% six times during the quarter. This compares with just one instance in 2017.

Ending the 1st quarter, the Fund had a weighted average market cap of $1.2 billion compared to the Index’s average weighted market cap of $3.0 billion. Given that the Fund is positioned towards the lower end of the small cap spectrum, one might normally expect market volatility to have an adverse effect on our portfolio given its investments in earlier stage growth companies with less trading liquidity. However, we are pleased to report that the Fund did well, on a relative basis, during this downside volatility, outperforming the Index on 11 of the 13 days when the Index posted the largest negative returns.

The 1st quarter was a mixed bag in terms of Index sector performance with Technology and Healthcare leading the way, with average returns of 10.4% and 6.1%, respectively. Industrials and Consumer Discretionary were laggards for the benchmark, posting negative returns of 1.5% and 4.0%, respectively.

The Fund’s relative outperformance was led primarily by our holdings in the Technology sector. Technology companies represented about 25% of the Fund’s assets and generated a return of about 13.4% in the quarter. Specific holdings that contributed to this strong return within Technology included 8×8 and Mimecast.

8×8 is a leading provider of cloud-based software solutions that enable business communication platforms including voice, video, collaboration, and contact centers to connect employees and customers. The company is operating within a very large global addressable market, approximating $50 billion, with technology that is much more conducive to the mobile and distributed workforce, compared to phone systems from 20 years ago that require an on-premise hardware stack for desktop phone systems. 8×8 started serving small businesses with communication solutions that delivered efficiencies and cost savings from older legacy phone systems. Over the years, 8×8’s technology has scaled to where they can now serve large enterprises on a global basis. This makes 8×8 unique in our universe of companies, as most of the small cap constituents do not have the potential to address such a large global market.

Mimecast provides cloud-based software solutions for email security. Like 8×8, Mimecast has benefited from competition against legacy platforms that are more costly to maintain and those that lack the innovation to keep up with the ever-changing email threat environment. Mimecast continues to move up-market by serving larger enterprises. Additionally, the company continues to innovate with new products that it can cross-sell into its existing customer base.

The Fund added 6 new positions in the quarter and moved on from 4, ending the quarter with 62 holdings. One of the new holdings in the quarter was Cardlytics, which was an initial public offering (IPO) that the Fund participated in. IPOs have been an important source of new idea generation for the Fund and we expect that trend to continue.

Cardlytics uses consumer purchase data from over 2,000 financial institutions to help marketers identify likely buyers at scale. Cardlytics engages with financial institutions to show purchase incentives and rebates from advertisers to the financial institutions’ customers whenever they log in to their checking or credit card accounts. Advertisers like the service because it results in extremely high return-on-investments (ROIs), and financial institutions like the service because they share in Cardlytics’ revenue. We believe there is a long runway for growth as the company is presently in beta testing with Wells Fargo, and we expect the bank will roll the platform out across its national footprint in 2019. Additionally, Cardlytics can continue to grow by signing other new financial institutions, expanding the number of internet customers within existing financial institutions, engaging new marketers, and growing spend with its existing marketers.


(As of 3/31/18) — The market experienced more volatility than we had seen for some time as the current bull market entered its 9th year. The Fund had some success in maneuvering through this environment, including the days where the market retrenched most significantly.

The Fund had a holding taken out in the quarter as CommerceHub is expected to be acquired by private equity. In this instance the acquirer was a financial buyer. However, we continue to believe that strategic buyers will be a driver of an acceleration of mergers and acquisitions (M&A) following the passage of corporate tax reform in late 2017. Lower effective tax rates could boost cash flows and free up resources for larger companies to pursue acquisitions of smaller companies in an attempt to enhance their growth profiles. With a weighted average market capitalization for our portfolio of around $1.2 billion and a median revenue growth rate of 12%, we think there is potential for increased M&A involving the fund’s holdings this year.

Additionally, the market has spent recent weeks contemplating potential trade disruption given social media and trade policy directives of Washington D.C. We believe that the Fund is somewhat insulated from a potential trade war, should it come to that, given the domestic focus of most of our investments. We estimate that the weighted average exposure to international sources of revenue for our Fund is approximately 15-20%. This compares to companies in the S&P 500 Index that are closer to 40-45%.

Given that we believe we are moving towards the latter stages of the market cycle, we remain keenly focused on valuations and fundamentals, and we continue to monitor the risk/reward profile of our holdings. As a result, we often make changes based on market moves intra quarter that provide either an opportunity to trim or add to a position based on the inefficiencies that exist at the smaller end of the market cap spectrum.

The Buffalo Emerging Opportunities Fund is focused primarily on identifying innovation within U.S. companies with primarily 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.

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. Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any security. Earnings growth is not representative of the fund’s future performance.

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.

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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 received 3 stars among 606 for the three-year, 2 stars among 534 for the five-year, and 4 stars among 404 Small Growth funds for the ten-year period ending 6/30/18.

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.

©2018 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.