Inception Date
  April 14, 1998

Total Fund Assets
  $585.40 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.

Risk vs Category



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.


Discovery Fund Webcast – September 2017

During this webcast, we covered:
• How innovative companies can lead to above average growth
• Key objectives of the Fund and their impact on current performance
• Our proprietary portfolio management process
• Fund performance YTD

Small Cap Fund Webcast – June 2017

During this webcast, we covered:
• Our proprietary portfolio management process
• Personnel changes made in 2015 and the people managing the Fund
• Key objectives over the last few years and their impact on current performance
• Fund performance YTD
• Fund outlook for the 2nd half of 2017 & beyond


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


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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.

The Fund managers seek to identify companies for the Small Cap Fund’s portfolio that are expected to experience growth based on the identification of long-term, measurable secular trends, and which, as a result, the managers believe 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 those which the managers believe have favorable attributes, including attractive valuation, strong management, conservative debt, free cash flow, scalable business models, and competitive advantages.

*** This presentation is only available to registered financial professionals ***

Performance (%)

As of 6/30/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund13.4016.0326.4912.9311.0611.9011.1412.10
  Russell 2000 Growth Index7.239.7021.8610.6013.6511.2410.956.52
  Lipper Small Cap Growth Fund Index7.8912.3826.3311.7213.2210.589.917.23
  Morningstar Small Growth8.5311.0522.7011.0412.7610.8510.607.65
As of 6/30/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund13.4016.0326.4912.9311.0611.9011.1412.10
  Russell 2000 Growth Index7.239.7021.8610.6013.6511.2410.956.52
  Lipper Small Cap Growth Fund Index7.8912.3826.3311.7213.2210.589.917.23
  Morningstar Small Growth8.5311.0522.7011.0412.7610.8510.607.65
YearBuffalo Small Cap FundRussell 2000 Growth IndexMorningstar Small Growth Category
(As of 6/30/18)

vs Russell 2000 Growth Index
Upside Capture105.75
Downside Capture94.95
Sharpe Ratio0.87

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 Holdings73
Median Market Cap$2.60 B
Weighted Average Market Cap$3.00 B
3-Yr Annualized Turnover Ratio43.29%
% of Holdings with Free Cash Flow62.50%
% of Holdings with No Net Debt41.67%
Active Share91.08%
Name of HoldingTickerSector% of Net Assets
HealthEquityHQYHealth Care2.26%
Bio-TechneTECHHealth Care2.06%
CatalentCTLTHealth Care1.99%
NevroNVROHealth Care1.97%
Lumentum HoldingsLITETechnology1.87%
CyrusOneCONEReal Estate1.81%
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 Small Cap Fund gained 2.32% in the 1st quarter, a result that was in-line with the Russell 2000 Growth Index return of 2.30%. The Index’s return was driven mainly by Technology which gained over 10% and drove 220 basis points (bps) of the benchmark’s 230 bps total return. Healthcare and Financials also advanced for the Index while most other sectors were down during the period.

The Fund managed to outperform in Technology and Telecom mainly due to solid returns from SaaS (Software as a Service) and UCaaS (Unified Communications as a Service) companies such as Twilio, Zendesk, Hubspot, and 8×8. Financials also performed very well on a relative basis while Healthcare and Industrials were the largest detractors from performance. Stock selection was beneficial to returns while sector allocation was slightly negative.

Twilio was the largest contributor to performance gaining just over 60% for the quarter. The stock was somewhat controversial last year due to declining sales from a large customer in Uber as well as declining gross margins. Twilio posted a solid month in February, showing extremely high rates of revenue growth of greater than 60% outside of Uber, while gross margins were stable, which led to the stock’s significant advance. Despite the move, the stock remains a relative value among high growth software companies, in our opinion, and growth should reaccelerate as the company anniversaries the declines in Uber revenue in the second half of the year.

Zendesk was also a solid contributor to return. The company continued to execute at a high level, with increased sales to larger accounts and continued growth in new products, while beating street estimates for revenue and billings growth. Salesforce.com’s announced acquisition of Mulesoft at a premium multiple also drove additional investor interest into SaaS companies, which helped boost shares of both Zendesk and Twilio.

Wageworks was the largest detractor to performance for the quarter. Shares were weak as the company announced that they would not file their 2017 annual report on a timely basis and would have to restate revenues in 2016 and 2017 due to incorrect accounting for a government contract in 2016. We believe the restatement is fairly small and the company will take the appropriate steps to improve internal controls and make management changes to restore investor confidence.


(As of 3/31/18) — We believe the environment for small capitalization companies in the U.S. remains positive due to lower tax rates, reduced regulation, increased merger and acquisition activity, and good global economic growth. However, we also believe that market volatility could remain heightened throughout the year due to the increased risk of a trade war with China, uncertainty around the approaching mid-term elections, the potential for increased regulation of large technology companies, and increased investor wariness of market valuations in the midst of the elongated bull market cycle.

As always, we continue to look for ways to upgrade the portfolio and have, in fact, reduced the weightings of some of our technology holdings where we believe the upside potential is limited. We will continue to look for ways to take advantage of the volatility to improve potential performance while still maintaining our long-term focus and discipline.

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. Diversification does not assure a profit, nor does it protect against a loss in a declining market.

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 Small Cap Fund received 4 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.

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.