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 602 Small Growth funds as of 4-30-2017 (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 4/30/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund9.2914.3028.786.2910.266.528.1311.38
Russell 2000 Growth Index5.577.2924.069.2712.897.978.295.69
Lipper Small Cap Growth Fund Index5.198.2120.347.9510.996.647.246.24
Morningstar Small Growth5.117.3822.877.8211.327.238.04-
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.


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 602 for the three-year, 2 stars among 528 for the five-year, and 3 stars among 387 Small Growth category funds for the ten-year period ended 4/30/17.

©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.