Buffalo Fund mines cheap Micro-Cap stocks

Buffalo Micro Cap Fund is finding cheap stocks despite the market's 20% gain this year, according to John Bichelmeyer, co-manager. The fund has risen 39% this year, beating 90% of its Morningstar peers. It was not so successful long-term, losing 3.7% annually, on average, during the past five years.
Here are the answers of America's top mutual fund managers on TheStreet.com's Fund Manager Five Spot, where they give their best stock picks in fast and furious questions.
Answering the question whether the fund is a bull or bear, Bichelmeyer said they are bullish. "Now keep in mind that our investment horizon is three to give years. Having said that, in the shorter term, is does appear the equity markets can continue to work their way higher as the economic recovery continues to unfold into 2010.
Despite the powerful market rally since March, the investment landscape is still one that we would describe as target rich. Opportunities are not as abundant as they were during the fourth quarter of last year and the first quarter of this year, but valuations remains attractive in our early stage, growth company universe," he commented
Talking about the top stock pick Bichelmeyer said the largest position in the fund right is MarketAxess Holdings, which is a provider of software that enables the online trading of corporate bonds, other fixed income securities and derivatives. Unlike equities, fixed income trading has still not aggressively migrated to electronic marketplaces.
"We believe that this will change in the coming years and MarketAxess is well positioned to take advantage of this shift. The company has extremely high incremental margins and generates a tremendous amount of excess cash flow that can be used to reinvest for future growth or returned to shareholders."