Inception Date
  April 14, 1998

Total Fund Assets
  $585.40 Million  (6/30/18)

Expense Ratio

Benchmark Index
  Morningstar U.S. Small Growth


Overall Morningstar™ rating out of 607 Small Growth funds as of 8/31/18 (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 607 funds in the Small Growth category, as of 8/31/18.


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 Morningstar U.S. Small 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.

Performance (%)

As of 8/31/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO SMALL CAP FUND13.2027.5638.0319.2611.9911.9810.8712.51
  Morningstar U.S. Small Growth Index11.2021.6633.2517.6714.1211.8710.686.77
  Russell 2000 Growth Index8.9018.5330.7216.3614.2011.5710.606.87
  Lipper Small Cap Growth Fund Index10.4222.6236.0217.6013.9411.459.767.63
  Morningstar Small Growth Category10.2821.0132.8916.8713.4811.5010.428.03
As of 6/30/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO SMALL CAP FUND13.4016.0326.4912.9311.0611.9011.1412.10
  Morningstar U.S. Small Growth Index7.8911.5723.7011.8413.6611.3510.986.45
  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 Growth Category8.5311.0522.7011.0412.7610.8510.607.65
(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.

As of July 27, 2018 the Morningstar U.S. Small Growth Index has replaced the Russell 2000 Growth Index as the Fund’s primary benchmark. The Advisor believes that the new index is more appropriate given the Fund’s holdings.

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
CoreCivicCXWReal Estate2.20%
Medidata SoutionsMDSOTechnology1.95%
HealthEquityHQYHealth Care1.94%
HMS HoldingsHMSYIndustrials1.94%
CyrusOneCONEReal Estate1.89%
RepligenRGENHealth Care1.86%
View Full Holdings

As of 6/30/18. 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.



(As of 6/30/18) — Supportive economic data drove positive domestic equity performance in the 2nd quarter. The unemployment rate declined to 3.8%, the lowest level in 18 years. Wages have continued to rise, with average hourly earnings up 2.7% as of May. Corporate earnings growth continued to be robust. The Federal Reserve increased their target rate by 0.25% and raised their forecast for growth and inflation again in June. Meanwhile, economic growth outside the U.S. slowed, with the divergence driving strength in the U.S. dollar. Increasing trade protectionism along with the dollar’s strength, led to the relative outperformance of domestically focused industries and smaller capitalization companies, which generally do less international business than large caps. Crude oil prices continued to rise, despite the strong dollar, driven by lower stockpiles in the U.S. and President Trump’s decision to withdraw from the Iran nuclear accord.

The Russell 3000 Index returned 3.89% in the quarter. Growth continued to outpace value, with the Russell 3000 Growth Index up 5.87% and the Russell 3000 Value Index up 1.71%. By size, the Russell Microcap Index led the way with a return of 9.97%, followed by the small cap Russell 2000 Index at 7.75%. The large cap Russell 1000 Index was up 3.57%, and the Russell Midcap Index was up 2.82%. Energy was the best performing sector, driven by strength in crude oil prices. The Consumer Discretionary, Information Technology, and Real Estate sectors also had strong quarters. Meanwhile, trade fears and rising input costs caused the underperformance of Industrials, and Financials were weaker as a result of the yield curve flattening.


(As of 6/30/18) — The Buffalo Small Cap Fund gained 13.40% in the 2nd quarter of 2018 and outperformed the Russell 2000 Growth Index (“the Index”), which gained 7.23%. The Index’s strength in the quarter was broad-based, with top-contributing sectors including health care, technology, and consumer. Collectively these sectors accounted for 5.71% of the Index’s total 7.23% return. All other sectors in the Index contributed positive returns, with the highest coming from industrials, real estate, and financials.

The Fund’s outperformance in the quarter was driven by well-above-index returns in technology and health care. The fund also outperformed in financials and real estate while underperforming in materials.

Top performing holdings in the Fund for the quarter included Twilio, Natera, and Trade Desk. Investments that represented the biggest drag on performance included Zoe’s Kitchen and e.l.f. Beauty.


Continuing its strong performance in the 1st quarter, Twilio was the Fund’s top performing holding in the 2nd quarter, gaining 47%. Despite investor concerns about declining sales from a large customer (Uber) as well as declining gross margins, the company has posted several solid quarters in a row, demonstrating high rates of revenue growth along with stable margins. While the company has closed much of the valuation gap with other high growth software companies, its prospects remain strong in our view, and growth should re-accelerate as the company anniversaries the declines in Uber revenue in the 2nd half of 2018.

Natera was also a solid contributor to the portfolio’s return during the period. The company is a genetic testing and diagnostics company that reported strong quarterly growth in revenue, new products, and accounts in its core business. The stock also experienced a significant move up near the end of the quarter when announcing it will launch a product to monitor for kidney transplant rejection in 2019, which has the potential to contribute meaningfully to the company’s growth in coming years.

The Trade Desk, a provider of a platform for buyers of advertising, was also a key contributor to the Fund’s outperformance during the quarter. The company reported very strong growth in its advertising channels, especially in Connected TV and audio, along with significant margin expansion. The company’s business model positions it well for future revenue growth, and market share gains from its closest competitor, Google’s DoubleClick.


On the downside, Zoe’s Kitchen represented the largest detractor from performance during the quarter. Although the company has a strong fast casual restaurant concept offering healthy, high quality food, its shares declined 40% after reporting disappointing 1st quarter results. These results reflected weak restaurant sales, slowing unit growth, and concurrent margin weakness, making investors question the company’s long-term growth prospects.

Another holding that underperformed was e.l.f Beauty, an innovative cosmetics company that sells relatively low-priced beauty products across many channels. The company’s brand is strong with consumers, has a long runway to expand presence at retailers, and could make an appealing candidate for a buyout by a larger cosmetic company. At the same time, the company’s operating results have consistently disappointed relative to initial lofty guidance first set by management at the time of its 2016 initial public offering (IPO), and the stock has been a laggard relative to the Index.


(As of 6/30/18) — Looking forward into the 2nd half of 2018, we believe the environment for small cap stocks in the U.S. remains positive. A relatively healthy job market and strong reported economic growth have set the stage for continued strong performance for many small cap companies. Less international exposure relative to large caps should buoy investor interest in small caps as trade war concerns continue. Furthermore, many small caps should continue to benefit from the Trump administration’s tax reform signed in December 2017.

At the same time, we also believe that market volatility could increase due to factors such as the recently enhanced risk of a trade war with China, uncertainty around upcoming midterm elections, or unexpected spikes in interest rates or oil prices. The valuations of many small cap stocks also remain elevated due to the lengthy bull market cycle, which does expose investors to contractions in valuation multiples.

We are continuing to look for ways to upgrade the portfolio, and have, in fact, reduced the weightings of some of our holdings that we believe have limited upside relative to their downside risk. We will continue to look for ways to take advantage of any market volatility to upgrade our small cap portfolio 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 607 for the three-year, 2 stars among 532 for the five-year, and 3 stars among 405 Small Growth funds for the ten-year period ending 8/31/18.

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.