Quick Facts

(As of 3/31/17)


Inception Date
  April 14th, 1998

Total Fund Assets
  $565.1 M

Expense Ratio

Benchmark Index
  Russell 2000 Growth


Overall Morningstar™ rating out of 599 Small Growth funds as of 3-31-2017 (derived from a weighted average of the fund’s three-, five-, and ten-year risk adjusted return measure, if applicable).


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.




Investment Strategy

The investment objective of the Buffalo Small Cap Fund is long-term growth of capital. The Small Cap Fund normally invests at least 80% of its net assets in equity securities, consisting of domestic common stocks and preferred stocks, of small capitalization (“small-cap”) companies — companies, at the time of purchase, with market capitalizations within the range of the Russell 2000® Growth Index ($23 million to $4.1 billion, as of 6/30/16).


An actively managed portfolio of smaller capitalization, rapidly-growing companies that can benefit from positive, long-term trends remains an excellent way to exploit an inefficient market.

~ Jamie Cuellar, Portfolio Manager



(As of 3/31/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund10.5110.5124.512.789.626.427.8811.24
Russell 2000 Growth Index5.355.3523.036.7212.
Lipper Small Cap Growth Fund Index6.516.5119.935.2810.526.786.946.18
Morningstar Small Growth5.565.5622.415.3410.737.31--
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 3/31/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund10.5110.5124.512.789.626.427.8811.24
Russell 2000 Growth Index5.355.3523.036.7212.
Lipper Small Cap Growth Fund Index6.516.5119.935.2810.526.786.946.18
Morningstar Small Growth5.565.5622.415.3410.737.31--
Each Morningstar category average represents a universe of funds with similar objectives.
YearBuffalo Small Cap FundRussell 2000 Growth IndexMorningstar Small Growth Category
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 3/31/17)
vs Russell 2000 Growth Index
Upside Capture82.88
Downside Capture99.56
Standard Deviation15.76
Sharpe Ratio0.17

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.

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 3/31/17)
# of Holdings73
Median Market Cap$2.34 B
Weighted Average Market Cap$2.78 B
3-Yr Annualized Turnover Ratio31.08%
% of Holdings with Free Cash Flow75.34%
% of Holdings with No Net Debt47.95%
Active Share88.89%
HoldingTickerSector% of Portfolio
Nevro NVROHealth Care2.46%
Dave & Buster's PLAYConsumer Discretionary2.26%
CyberArk Software CYBRTechnology2.25%
CoStar Group CSGPReal Estate2.24%
InterXion Holding INXNTechnology2.23%
Snyder's-Lance LNCEConsumer Staples2.22%
Cogent Communications CCOICommunications2.18%
Monolithic Power Systems MPWRTechnology2.13%
WageWorks WAGEIndustrials2.12%
Bio-Techne TECHHealth Care2.07%
View Full Holdings

As of 12/31/16. 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 3/31/17. 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 3/31/17. Market Cap percentages may not equal 100% due to rounding.



Capital markets got off to a volatile start in 2016 with the Russell 3000 Index dropping over 11% and West Texas Intermediate (WTI) Crude Oil down almost 30% by mid-February. Concerns about soft Chinese economic growth contributed to equity market weakness early in the year, and the energy complex was struggling to resolve its oversupplied condition. Meanwhile, perceived “safe-haven” assets performed strongly as U.S. 10-year Treasury notes advanced and gold appreciated over 15% during the same time frame. Economic concerns and a falling stock market led the Federal Reserve to adopt a less aggressive stance toward interest rate increases, and falling crude production eventually calmed fears of oversupply. These drivers led to a rebound in prices of both equities and crude oil and began a period of steadily rising prices and declining volatility that would continue from mid-February through the end of the year with only minor interruption. Interestingly, perceived ”safe-haven” assets continued to perform strongly as gold and U.S. Treasuries rallied alongside equities into the summer and largely held those gains into the fall. The fourth quarter of 2016 began with this uneasy disequilibrium still largely intact, but sentiment changed dramatically with Donald Trump’s surprise election victory on November 8th. The election outcome created expectations of pro-growth policies and deregulation that drove accelerating gains in stock prices, higher interest rates and associated declines in the prices of both Treasury bonds and gold, all of which generally persisted through the end of 2016.

The Russell 3000 Index returned 12.74% for the full year. The Russell 3000 Value Index outperformed the Russell 3000 Growth Index by 11.01% during the year, and smaller-capitalization indices such as the Russell Microcap Index, the Russell 2000 Index and the Russell Midcap Index outperformed the large-capitalization Russell 1000 Index by 8.31%, 9.25% and 1.74%, respectively. Much of the outperformance of value stocks can be attributed to the strong performance of the energy sector. Outperformance of small-capitalization stocks was reflective of investor aversion to greater international exposure of larger companies in the face of a rising dollar, as well as increasingly optimistic expectations for the domestic economy and for a lower U.S. corporate tax rate following the election. For the year, Energy and Materials were the best performing sectors in the Russell 3000 Index as expectations for infrastructure investment and increasing investor risk appetite following the election contributed to the reversal of prior-year underperformance that was already underway. Health Care was the worst performing sector for the year, as concerns about political backlash against rising drug prices contributed to declines in Pharmaceutical & Biotech stocks.

For the fourth quarter, the Russell 3000 Index returned 4.21%. The Russell 3000 Value Index outperformed the Russell 3000 Growth Index by 6.04% during the quarter while smaller-capitalization indices such as the Russell Microcap Index and the Russell 2000 Index outperformed the large-capitalization Russell 1000 Index by 6.22% and 5.00%, respectively. The Russell Midcap Index of mid-sized companies underperformed the Russell 1000 Index by 0.62% in the fourth quarter and was the lone exception to the trend of small outperforming large. Outperformance of more cyclically sensitive value stocks and small capitalization stocks reflected some of the same drivers that were in place earlier in the year, as well as increasingly optimistic expectations for economic growth, higher interest rates and expectations of a lower corporate tax rate in the U.S. following the election. Financial Services was the best performing sector in the fourth quarter, benefiting from higher interest rates and expectations for a less adversarial regulatory regime under the new Republican administration. The flip-side of greater risk appetite was less demand for stable, “bond-like” equities which was reflected in the lower-risk Consumer Staples sector performing poorly during the quarter. Political risk continued to put pressure on the Health Care sector, as uncertainty regarding potential for drug price regulation and repeal of the Affordable Care Act contributed to Health Care being the worst performing sector during the quarter.


The Buffalo Small Cap Fund declined 0.28% in the fourth quarter while the Russell 2000 Growth Index gained 3.57%. There was a very obvious disparity on what sectors worked in the Index and what did not. Financials, Industrials, Consumer Discretionary, and Materials all gained over 9% for the quarter while Healthcare declined almost 8% and Technology and Staples gained less than 2%. As discussed above, the surprise election of Donald Trump brought about dramatic repositioning and massive sector rotation as investors sold growth stocks in technology and healthcare to fund purchases of cyclical and financial stocks with the belief that regulations would be reduced and the economy would accelerate. While Financials, Industrials and Materials stocks comprise 32% of the Russell 2000 Growth Index, they contributed 94% of the Index’s return this quarter. As a manager that focuses more on growth companies over pure cyclicals, we are not surprised that we underperformed in a market that shunned growth stocks in favor of value, but we are disappointed by the magnitude of the underperformance. In the first few weeks of January, there are signs that the “Trump trade” has started to fade as investors realize that political and regulatory change will take some time to take effect and our relative performance has improved.

While the market backdrop was not favorable for our style, there were also some fundamental disappointments by some portfolio companies that detracted from performance. The largest underperformer was Nevro, the spinal cord stimulation company that had been one of our biggest winners so far this year. While Nevro has dramatically outperformed Street revenue expectations over the past couple of quarters, company management failed to raise guidance for the December quarter and reigned in aggressive Street analysts’ revenue expectations for 2017. Medical devices were perceived as “losers” in the Trump trade as investors worried that the 20 million Americans that received healthcare coverage from Obamacare might leave the system and the rotation away from healthcare was also partially responsible for Nevro’s decline.

Fitbit was also a meaningful underperformer for the quarter. Growth in the wearables category in which they compete has decelerated and the company has also experienced some manufacturing issues on a new product forcing them to reduce guidance for the fourth quarter which caused the stock’s decline. Paylocity, an outsourced payroll provider, was hurt by the Trump victory as they received some revenue from filing regulatory forms that confirmed compliance with the Affordable Care Act (ACA) which will likely be significantly modified or repealed by the new Administration. While we believe this composes less than 10% of the company’s revenue, the stock declined over 30% in the quarter.

On the upside, Dave & Buster’s Entertainment was our biggest winner. The restaurant and entertainment complex continued to outpace the casual dining industry as their novel entertainment experience and a greater focus on sports viewing has drawn new visitors to its establishments and provided growth much better than expectations.


The setup for 2017 appears to bode well for both accelerated economic growth and the performance potential of U.S. equities. The new Administration’s focus on deregulation, infrastructure spend, and tax reform point to a more pro-growth, business-friendly environment. Factoring in higher interest rates, one can make a case for continued rotation out of fixed income into equities. At the same time, many of the new Administration’s proposals are not well-defined, and could be difficult to implement in reality. With the market already discounting a more business-friendly environment, we could experience increased market volatility throughout 2017.

We believe that the recent push into value stocks has left many outstanding growth stocks with attractive valuations. We remain focused on investing in secular growth companies that we believe are attractively priced with strong balance sheets. With higher domestic revenues, U.S. small cap stocks could be positioned well going forward if President Trump follows through on his more protectionist policies. We remain convinced that the inefficiencies inherent in small cap and our current position in the economic cycle are best suited for disciplined, active management of the portfolio and we are thankful for your continued support as shareholders.

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.

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 RatingTM 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 RatingTM 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 Small Cap Fund received 2 stars among 599 for the three-year, 2 stars among 527 for the five-year, and 3 stars among 386 Small Growth category funds for the ten-year period ended 3/31/17.

©2017 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.