Q. What are your thoughts on Buffalo Small Cap Fund? It doesn’t seem to have done as well lately.
— R.C., via the Internet
A. It plays the trends it considers important, such as the aging of Baby Boomers, the switch from analog to digital technology and the increasing rates of obesity and diabetes.
While over the long haul the fund’s strategy has generally done well, it inevitably hits dry spells. Its lack of energy and industrial stocks and its hefty investment in technology have hurt returns lately.
As of Monday, the $1.94 billion Buffalo Small Cap Fund (BUFSX) is up 6 percent over the past 12 months to rank in the lowest 10 percent of small growth funds. But its three-year annualized total return of 19 percent puts it in the top 17 percent of its peers.
“The things this fund favors are bound to return to favor at some point, but we’d only recommend it with some reservation, and it is not one of our analyst picks,” said Reginald Laing, analyst with Morningstar Inc. in Chicago. “It’s difficult to say when the things it favors will return to favor, and … it’s not as nimble as some other small-cap funds.”
Kent Gasaway and Robert Male, co-managers since the fund’s 1998 inception, have more than one-third of their personal assets invested in the funds they oversee at Kornitzer Capital Management. Longtime co-manager Tom Laming left in late 2003 and was replaced by Grant Sarris. Four analysts support this leadership team.
They focus on stocks with market capitalization of less than $1 billion, use a “growth at a reasonable price” approach, sometimes make big bets on sectors and have low portfolio turnover. Health care and consumer services each comprise about one-fourth of Buffalo Small Cap assets, with technology hardware and consumer goods other significant concentrations.
This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment. Its annual expense ratio is 1.01 percent.
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Andrew Leckey is a Tribune Media Services columnist.