Inception Date
  April 14, 1998

Total Fund Assets
  $536.14 Million  (3/31/18)

Expense Ratio

Benchmark Index
  Russell 2000 Growth


Overall Morningstar™ rating out of 592 Small Growth funds as of 3/31/18 (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 592 funds in the Small Growth category, as of 3/31/18.


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 3/31/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund2.322.3217.658.3010.1110.4312.1711.55
  Russell 2000 Growth Index2.302.3018.638.7712.9010.9512.046.23
  Lipper Small Cap Growth Fund Index4.154.1522.009.5412.3310.0210.906.92
  Morningstar Small Growth2.282.2818.078.7711.8810.2811.517.31
As of 3/31/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Small Cap Fund2.322.3217.658.3010.1110.4312.1711.55
  Russell 2000 Growth Index2.302.3018.638.7712.9010.9512.046.23
  Lipper Small Cap Growth Fund Index4.154.1522.009.5412.3310.0210.906.92
  Morningstar Small Growth2.282.2818.078.7711.8810.2811.517.31
YearBuffalo Small Cap FundRussell 2000 Growth IndexMorningstar Small Growth Category
(As of 3/31/18)

vs Russell 2000 Growth Index
Upside Capture91.84
Downside Capture93.62
Sharpe Ratio0.57

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 3/31/18)

# of Holdings76
Median Market Cap$2.25 B
Weighted Average Market Cap$2.99 B
3-Yr Annualized Turnover Ratio44.92%
% of Holdings with Free Cash Flow66.67%
% of Holdings with No Net Debt46.67%
Active Share88.74%
Name of HoldingTickerSector% of Net Assets
CatalentCTLTHealth Care2.32%
Generac HoldingsGNRCIndustrials2.10%
HealthEquityHQYHealth Care2.05%
Monolithic Power SystemsMPWRTechnology1.98%
Bio-TechneTECHHealth Care1.90%
Summit MaterialsSUMMaterials1.81%
View Full Holdings

As of 12/31/17. 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 3/31/18. 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 3/31/18. Market Cap percentages may not equal 100% due to rounding.


Commentary for Q1 2018   (As of 3/31/18)


(As of 12/31/17) — Equity markets ended 2017 on a strong note. The 4th quarter saw a continuation of trends that have influenced the market all year. Investor optimism about improving global economic growth and strong corporate earnings led to another quarter of higher stock prices and low volatility. Strong holiday sales and the passage of tax reform legislation also provided tailwinds to equity markets during the period. Volatility continued to hover near record lows, and, for the first time since 1958, the S&P 500 Index delivered positive returns in every single month of the year.

The Russell 3000 Index produced a total return of 6.34% in the 4th quarter. Growth continued to outperform value, as the Russell 3000 Growth Index advanced 7.61% and outperformed the Russell 3000 Value Index return of 5.08%. Large companies generally outperformed smaller companies during the quarter. The Russell 1000 Index returned 6.59%, the Russell Midcap Index returned 6.07%, the Russell 2000 Index returned 3.34%, and the Russell Microcap Index returned 1.80%. Consumer discretionary and technology were the best performing sectors while utilities, health care, and consumer staples underperformed in the quarter.


(As of 12/31/17) — The Buffalo Small Cap Fund gained 3.80% during the 4th quarter underperforming its benchmark, the Russell 2000 Growth Index, which gained 4.59%. The index generated strong returns across all industries, with the largest advances from consumer staples, energy, consumer discretionary, and industrials. The fund’s biggest sources of relative outperformance were in technology and industrials while health care and financials were the largest detractors. For the full calendar year, the fund outperformed the index by 4.90% with a return of 27.07% compared to 22.17% for the index.

Cavium was the largest contributor to the fund’s performance in the quarter, gaining nearly 29%. The company announced an agreement in November to be acquired by Marvell Technology at a significant premium to its share price. The merger will create a leading company in the semiconductor chip industry.

Universal Display was another large contributor during the quarter. The company is a leading provider of materials used in the manufacturing of OLED glass and experienced very strong demand for its products, as mobile phone makers ramp up production of phones with these displays. We believe the long-term outlook for Universal Display is strong, as the mobile phone opportunity continues to unfold and other devices such as tablets and televisions also likely shift to these displays.

Nevro declined by about 24% during the quarter and was the biggest detractor for the fund. The company is a leader in the market for spinal cord stimulation products, and the stock declined after giving fairly conservative revenue guidance for the 4th quarter on their 3rd quarter call. However, Nevro gave 4th quarter preliminary results early in 2018 that were much better than consensus, suggesting solid growth remains intact.

Another investment that underperformed in the quarter was Twilio, which offers solutions that enable companies to communicate with their customers via voice, text message, etc. Twilio’s share price has been weak as the company is losing revenue from a large customer (Uber), and investors are concerned about potential gross margin erosion. Our long-term outlook for the stock is positive given its large and growing addressable market and our belief that margin contraction concerns are overstated. The company will start to anniversary the reduction in revenue from Uber in 2018 and should return to more normalized growth.


(As of 12/31/17) — We continue to be positive on the outlook for smaller capitalization companies in the U.S. The tax legislation passed by Congress at the end of 2017 should disproportionately benefit many small cap companies as their operations are often concentrated in the U.S. and many have historically paid high cash taxes. The ability for companies to repatriate foreign cash at lower tax rates likely increases the amount of merger and acquisition activity and many small companies could be acquisition candidates.

A more business-friendly regulatory environment has given companies increased confidence in making capital expenditures, hiring more employees, and increasing wages. Moreover, the U.S. economy continues to show signs of strength with relatively low unemployment, accelerating U.S. gross domestic product (GDP) growth, and positive commentary from many companies about their outlook moving in 2018.

At the same time, as equity markets trade at or near all-time highs, there is a heightened risk of a sell-off driven by factors such as a policy misstep by central banks, a crisis in a foreign region like the Middle East or North Korea, or companies reporting earnings that fall short of lofty investor expectations. We continue to focus on trimming or selling portfolio positions with limited upside potential while finding new ideas with the potential to benefit from long-term trends and trade at attractive valuations. We are also seeking to maintain a diversified portfolio by monitoring risk exposure to any single stock, business model, or sector.

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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Terms of Use – Email lists are created for use by U.S. investment professionals only and are published strictly for informational purposes. Providing access to the content of these emails does not explicitly or implicitly constitute a solicitation of services or products of the Buffalo Funds, Kornitzer Capital Management, or any of their affiliates. The information contained in the emails is not intended for distribution to, or for use by, investment professionals in a jurisdiction where distribution or purchase is not authorized. The information contained in these emails is not appropriate for use by individual investors. By registering for any of these emails, you agree to Buffalo's terms and conditions and that you are qualified as an institutional investor or otherwise member of a registered broker/dealer, registered investment advisor, or investment consulting firm.


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 3 stars among 592 for the three-year, 2 stars among 531 for the five-year, and 3 stars among 402 Small Growth funds for the ten-year period ending 3/31/18.

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.