Quick Facts

(As of 6/30/17)


Inception Date
  April 14, 1998

Total Fund Assets
  $566.5 M

Expense Ratio

Benchmark Index
  Russell 2000 Growth


Overall Morningstar™ rating out of 599 Small Growth funds as of 6/30/17 (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


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 599 funds in the Small Growth category, as of 6/30/17.


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

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 ($144 million to $4.4 billion, as of 5/12/17).

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 for registered financial professionals ***


(As of 6/30/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund5.4816.5728.624.9310.886.349.3011.39
Russell 2000 Growth Index4.399.9724.407.6413.987.829.555.77
Lipper Small Cap Growth Fund Index4.2010.9820.556.5612.486.468.276.32
Morningstar Small Growth4.3310.1523.126.6712.817.059.026.92
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 6/30/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund5.4816.5728.624.9310.886.349.3011.39
Russell 2000 Growth Index4.399.9724.407.6413.987.829.555.77
Lipper Small Cap Growth Fund Index4.2010.9820.556.5612.486.468.276.32
Morningstar Small Growth4.3310.1523.126.6712.817.059.026.92
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 6/30/17)

vs Russell 2000 Growth Index
Upside Capture83.85
Downside Capture95.83
Standard Deviation14.87
Sharpe Ratio0.32

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 6/30/17)

# of Holdings73
Median Market Cap$2.23 B
Weighted Average Market Cap$2.70 B
3-Yr Annualized Turnover Ratio35.95%
% of Holdings with Free Cash Flow71.05%
% of Holdings with No Net Debt50.00%
Active Share89.69%
Name of HoldingTickerSector% of Net Assets
NevroNVROHealth Care2.57%
InterXion HoldingINXNTechnology2.23%
Monolithic Power SystemsMPWRTechnology2.19%
CoreCivicCXWReal Estate2.18%
HealthEquityHQYHealth Care2.07%
Bio-TechneTECHHealth Care2.03%
Supernus Pharmaceuticals (C)SUPNHealth Care2.01%
Dave & Buster'sPLAYConsumer Discretionary2.00%
View Full Holdings

As of 3/31/17. 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 6/30/17. 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 6/30/17. Market Cap percentages may not equal 100% due to rounding.


Equity markets got off to a strong start in the first quarter of 2017, thanks to an improving economic outlook. In February, small business optimism, as measured by the National Federation of Independent Businesses, was at its highest level in 12 years. In addition, the University of Michigan’s March consumer confidence survey showed that consumers were more confident in the economy than they have been at any time since 2000. Against this backdrop, growth stocks outperformed value stocks, led by technology, health care, and consumer discretionary companies. The recent strength in infrastructure companies, banks, and high-tax-rate stocks stalled late in the quarter when, following Congress’s failure to agree on a health care reform bill, investors began to question the Trump administration’s ability to enact elements of its pro-growth agenda. Within commodities, the price of West Texas Intermediate (WTI) crude oil fell 6% during the quarter in response to better than expected U.S. oil inventories and production.

The Russell 3000 Index advanced 5.74% in the first quarter and larger cap stocks outperformed smaller cap stocks. The Russell 1000 Index returned 6.03%, followed by the Russell Mid Cap Index return of 5.15%, and the Russell 2000 Index result of 2.47%. The Russell Micro Cap Index advanced just 0.38% in the quarter. The Russell 3000 Growth Index outperformed the Russell 3000 Value Index by 5.64%. Technology was the best performing sector during the quarter while the energy sector was the worst performer, driven by the decline in crude oil.


The Buffalo Small Cap Fund rose 10.51% in the first quarter while the Russell 2000 Growth Index gained 5.35%. As we discussed in last quarter’s update, the market rotation into financials and cyclicals during the fourth quarter of 2016 started to fizzle in this first quarter of 2017 and the “Trump Trade” unwound. In the fourth quarter commentary, we remarked that the market may have gotten ahead of legislative reality, and the Trump administration’s inability to repeal and replace Obamacare showed definite proof that this was the case. In our view, the post–election reflation trade left a lot of high quality growth stocks trading at very attractive multiples and when the Trump Trade reversed this quarter, the market took notice of these growth stocks and bid them higher.

Our relative performance this period more than made up for relative underperformance late last year. One of the things we were most pleased with during the quarter was the breadth of outperformance; all sectors except for materials outperformed its respective benchmark sector. Outperformance was driven by stock selection while sector allocation effect was slightly negative. Technology and Industrials provided the greatest relative performance led by strength in software and commercial services, respectively. Despite a significant outperformance from biotechnology in the index during the quarter, the portfolio’s performance in healthcare was in line with the benchmark.

The fund ended the quarter with 73 stocks, slightly over the high end of our targeted range due to the addition of a few positions late in the quarter. We are now in the enviable position of having new stocks compete with existing ones to get in the portfolio which could further optimize the portfolio’s construction and ultimately improve performance. We have gradually increased the number of stocks over the last two years from 52 entering 2015, and believe the additional stocks should ultimately help reduce single security risk yet still allow an adequate level of weight for high conviction stocks.

Regarding drags on results, SPS Commerce was an underperformer this quarter. While e-commerce has historically been a tail-wind to this fairly predictable business selling supply chain software to wholesalers and retailers, some of SPS Commerce’s customers are now facing extreme disruption, including bankruptcy, which is delaying the sales cycle for their products and reducing their organic growth rate. The stock was sold during the period.

Regarding contributors to results, Exact Sciences was the best performing stock during the quarter. The company continued to gain payer, doctor and patient support for Cologuard, a commercialized alternative to colonoscopy for detecting colorectal cancer. Investors are now starting to give some attention to the company’s pipeline of screening tests in other areas of oncology like lung and breast cancer. Universal Display was another top performer for the period. The demand for the company’s intellectual property, materials and process know how used in the production of Organic Light Emitting Diodes (OLED) is increasing rapidly as Asian display manufacturers ramp capacity for OLED use in mobile handset displays.


The setup for 2017 appears to bode well for both accelerated economic growth and performance 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.

Investors are now keeping a close eye on Trump’s ability to pass meaningful tax reform, especially after promises of healthcare reform have so far fallen short. Inability to provide tax reform may cause market volatility though expectations for the timing of results are being actively managed by the new administration.

While we are pleased with the number of securities in the portfolio, we continue to look for additional ideas that could provide greater risk-adjusted returns. We have spent considerable time over the past few months looking at companies with a greater cyclical profile that could stand to benefit from factors like accelerating job growth, improved construction activity, and increased energy production. We would expect these companies to outperform in this environment of an elongated economic cycle. While we have added some new positions in these areas, we are remaining true to our process of identifying potential beneficiaries of long-term trends and implementing our valuation discipline. We continue to actively reduce stocks with disproportionate downside risk and those that have graduated well into being midcap stocks. We appreciate your continued support and confidence.

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 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 2 stars among 599 for the three-year, 2 stars among 533 for the five-year, and 3 stars among 398 Small Growth funds for the ten-year period ending 6/30/17.

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.

©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.