Discovery Fund

Discovery Fund

Quick Facts
InvestorInstitutional
Ticker:BUFTXBUITX
Inception Date:4/16/20017/1/2019
Expense Ratio:1.02%0.87%
Total Net Assets:$1.78 Billion  (3/31/21)
Category:Mid Cap Growth
Benchmark:Morningstar U.S. Mid Growth
Related Material:
   Fund Fact Sheet Q1 2021
   PM Commentary Q1 2021
   Summary Prospectus
FUND OBJECTIVE & INVESTMENT PROCESS

The investment objective of the Buffalo Discovery Fund is long-term growth of capital.

The Fund managers seek to identify companies expected to benefit from innovation and 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 engaged in innovative strategies are those who, in the Fund managers’ opinion, are engaged in the pursuit and practical application of knowledge to discover, develop, and commercialize products, services, or intellectual property.

Companies are screened using in-depth, in-house research to identify those which the Fund managers believe have favorable attributes, including attractive valuation, strong management, conservative debt, free cash flow, scalable business models, and competitive advantages.

ESG INTEGRATION

Management of the Buffalo Discovery Fund integrates ESG (Environmental, Social, and Governance) related factors into the investment decision making process. ESG-related factors material to the risk and return of investments are explicitly considered, alongside traditional financial factors, when making investment decisions.

Learn More About ESG Integration

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To us, innovation means to discover and transform new ideas into meaningful commercial value. The greater the economic impact and the longer the staying power, the better.

We seek under-appreciated stock opportunities in companies where thoughtful management teams are in a favorable position to use innovation for market advantage and sustained shareholder value creation.

Dave Carlsen, CFA, Co-Portfolio Manager

Morningstar Rating

       

Overall Morningstar Rating™ of BUFTX based on risk-adjusted returns among 547 Midcap Growth funds as of 5/31/21.

Investment Style

Performance (%)

As of 5/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(4/16/01)
BUFFALO DISCOVERY FUND - Investor0.684.2037.2818.0217.6314.5012.5610.2710.65
BUFFALO DISCOVERY FUND - Institutional0.714.2537.4718.2017.8014.6812.7310.4410.81
Morningstar U.S. Mid Growth Index0.912.3438.5622.7920.7414.4711.799.389.93
Morningstar Mid-Cap Growth Category1.656.2446.4019.8019.0513.4311.069.358.68
As of 3/31/213 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(4/16/01)
BUFFALO DISCOVERY FUND - Investor2.702.7067.4918.6417.8614.8212.0310.66
BUFFALO DISCOVERY FUND - Institutional2.762.7667.7518.8318.0515.0012.2010.83
Morningstar U.S. Mid Growth Index-1.62-1.6273.2622.3720.5914.3211.169.80
Morningstar Mid-Cap Growth Category3.963.9681.9520.2919.1613.3810.478.62
For performance prior to 7/1/19 (Inception Date of Institutional Class), performance of the Investor Class shares is used and includes expenses not applicable and lower than those of Investor Class shares. 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.
3 Year Risk Metrics
BUFTX vs Morningstar U.S. Mid Growth Index (As of 3/31/21)
Upside Capture76.81
Downside Capture88.72
Alpha-0.94
Beta0.89
Sharpe Ratio0.89
Hypothetical Growth of $10,000
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.

Portfolio

Portfolio Characteristics
(As of 3/31/21) 
 
# of Holdings82
Median Market Cap$19.15 B
Weighted Average Market Cap$22.28 B
3-Yr Annualized Turnover Ratio94.71%
% of Holdings with Free Cash Flow75.31%
Active Share75.05%
Top 10 Holdings
HoldingTickerSector% of Net
Assets
NateraNTRAHealthcare2.15%
Penn National GamingPENNConsumer Discretionary2.11%
Take-Two InteractiveTTWOCommunications1.78%
IHS MarkitINFOIndustrials1.78%
BandwidthBANDTechnology1.77%
IAAIAAIndustrials1.74%
Global PaymentsGPNIndustrials1.71%
UpworkUPWKIndustrials1.71%
ExpediaEXPEConsumer Discretionary1.70%
MSCIMSCIFinancials1.65%
TOP 10 HOLDINGS TOTAL18.10%
As of 12/31/20. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Fund holdings are subject to change and are not recommendations to buy or sell any securities.
Sector Weighting
As of 3/31/21. 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.
Market Capitalization
As of 3/31/21. Market Cap percentages may not equal 100% due to rounding.

Management

Dave Carlsen, CFA
Portfolio Manager

29 Years of Experience

 View full bio

Jamie Cuellar, CFA
Portfolio Manager

29 Years of Experience

 View full bio

Ken Laudan
Portfolio Manager

28 Years of Experience

 View full bio

  Click here to read about the recent portfolio manager changes for the Buffalo Discovery Fund.

Commentary

CAPITAL MARKET OVERVIEW

(As of 3/31/21) — Equity markets continued to move higher in the 1st quarter of 2021, with the S&P 500 Index returning 6.17%. The period was marked by outperformance of value stocks as the market rotation that began in the last quarter of 2020 became even more pronounced. The vaccination rollout, combined with prospects for more fiscal stimulus, bolstered optimism towards companies that could benefit from the economy reopening. Additionally, an 80+ basis point move higher in the 10-Year U.S. Treasury yield during the quarter left sentiment towards growth stocks relatively more subdued.

The broad market Russell 3000 Index advanced 6.35% in the quarter. Value outperformed growth for the second straight quarter, with the Russell 3000 Value Index up 11.89% compared to the Russell 3000 Growth Index returning 1.19%. Relative performance was inversely-correlated with market cap size in the quarter, with the Russell Micro Cap Index up 23.89%, the small cap Russell 2000 Index up 12.70%, the Russell Midcap Index up 8.14%, and the large cap Russell 1000 Index returning 5.91%. The more cyclically-sensitive Energy, Financial, and Industrial sectors performed best in the quarter. Consumer Staples, Information Technology, and Utilities were the bottom three performing sectors. All sectors produced positive returns.

PERFORMANCE COMMENTARY

(As of 3/31/21) — The Buffalo Discovery Fund (BUFTX) gained 2.70% during the quarter, outperforming the Morningstar U.S. Mid Growth Index’s decline of 1.62%. The Fund outperformed the Index in all of the major sectors that comprise the bulk of the benchmark – Consumer Discretionary, Healthcare, Technology, and Industrials – but lagged slightly in Financials and Telecommunications Services. Stock selection drove all of the outperformance while sector allocation was a slight drag on relative performance. The overall rotation to “value” from “growth” led to a decline in the Index in traditional growth areas of Consumer Discretionary, Healthcare, and Technology. Despite this backdrop, the Fund managed to post positive returns in all of these sectors, as our valuation discipline and focus on downside protection kept us out of most of the high growth stocks that were hit hard by the rotation.

TOP CONTRIBUTORS

The top contributor for the portfolio in the 1st quarter was Ligand Pharmaceutical, which gained 53%. A highly shorted stock coming into the quarter, Ligand surged on a short squeeze alongside other highly shorted stocks as it was disclosed that troubled hedge fund Melvin Capital owned put options on Ligand as well as other companies like GameStop and Bed Bath & Beyond. We had been quite surprised that the short interest remained stubbornly high throughout 2020 despite strong fundamentals that even improved during the COVID outbreak, as Ligand’s product Captisol is in Gilead’s drug Remdisivir to improve its tolerability, which led to a windfall in revenues and cash flow for Ligand. We believe there is additional upside potential to come from Ligand as its lead drug discovery platform, OmniAb, continued to see licensees get closer to commercialization, which could generate high margin royalty revenue for Ligand.

Generac was the next largest contributor during the quarter. Generac continues to gain investor attention as demand for its home standby generators likely increased massively during the Texas power crisis in February 2021. When combined with rolling blackouts in California, increased frequency and intensity of hurricanes, and their entry into the home battery backup market, it is easy to see why demand for Generac’s products has increased immensely and the stock has responded.

TOP DETRACTORS

Tenable, a security software company, was the largest detractor to performance in the quarter. The stock rallied in the December 2020 quarter as the high profile SolarWinds hack caused investors to bid up many cybersecurity stocks in anticipation of an acceleration in revenue growth. When the company gave 2021 revenue guidance that assumed no incremental increase in revenues due to the hack, it was considered a disappointment by investors and the stock gave back all of the December gains. We believe management is smartly setting guidance that allows for them to beat consensus and potentially raise guidance through the year, and the pull back in the stock is an opportunity for long term investors.

OUTLOOK

(As of 3/31/21) — The outlook remains generally positive as robust monetary and fiscal stimulus provides an inviting backdrop for investors. While a quick rise in interest rates has given some pause on growth stocks and facilitated a catchup trade for value stocks, we do not believe the prospect of a low single digit yield on a ten-year government bond is going to provide a suitable enough return for investors to begin to abandon equities.

2021 should continue to benefit from a recovering economy with above average gross domestic product (GDP) growth, but as we return to pre-COVID economic levels, we believe economic growth likely gets stymied, as higher federal debt levels and higher taxes eventually slow the economy, which may again put premium multiples on companies that can grow faster than the market. While there is also chatter about inflation ruining the party, we believe we are still a ways away from seeing enough inflation sustaining at a level that gets the Federal Reserve concerned enough to take action on interest rates. Meanwhile COVID variants and the durability of responses to vaccinations remain a wildcard, but the rapid dissemination of vaccines by the new administration is definitely a positive for economic recovery and a return to normalcy. Higher tax rates will be required to pay for additional fiscal stimulus and could take a small bite out of earnings growth, but we do not believe there is enough political capital or will to raise taxes high enough to choke the market.

We continue to tighten up the portfolio and focus on our favorite ideas – there are now 82 positions in the Fund. We have continued the process we started last year in getting a little more cyclical exposure in the portfolio and remain ever mindful of valuations as there are still signs of excess in areas like high growth software. We have also steadily added companies at the lower end of the market cap range as smaller companies generally outperform coming out of periods of recession. They are also trading at attractive valuation and have solid operating leverage. As always, we continue to focus on premier, innovative companies that benefit from long-term trends and trade at attractive valuations, and we appreciate your continued support.

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. Investing in both actively and passively managed mutual funds involves risk and principal loss is possible. Earnings growth is not representative of the fund’s future performance.
DISCOVERY FUND NEWS

Discovery Fund

Total Assets $1.78 Billion  (3/31/21)
Expense Ratio 1.02% / 0.87%
Benchmark Morningstar U.S. Mid Growth

7 Buffalo Funds Named to IBD Best Mutual Funds 2021 List

Seven Buffalo Funds were named to Investor’s Business Daily Best Mutual Funds 2021 list, including the Best U.S. Diversified, Growth, Large Cap, Mid Cap, Small Cap, International, and U.S. Taxable Bond Fund categories.

Literature

General Account
Forms
Investor
Class
Institutional
Class
Both
  New Account Application
  New Account Application - Entity
  Change or Add Account Details
  Cost Basis Method Election
  Power of Attorney
Individual Retirement Account (IRA) Forms
  IRA Account Application
  IRA Beneficiary Addition / Change
  IRA Required Minimum Distribution (RMD)
  IRA / Qualified Plan Distribution Request
  IRA Transfer
Coverdell Education Savings Accounts (ESA) Forms
  Coverdell ESA Application
  Coverdell ESA Distribution Request
  Coverdell ESA Transfer
Retirement Information
  Retirement Savings Options for Individuals

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.

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 Discovery Fund (BUFTX) received 3 stars among 547 for the 3-year, 3 stars among 490 for the 5-year, and 4 stars among 380 Mid-Cap Growth funds for the 10-year period ending 5/31/21.

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. ©2021 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. 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.

Dividend Focus Fund

Dividend Focus Fund

Quick Facts
InvestorInstitutional
Ticker:BUFDXBUIDX
Inception Date:12/3/20127/1/2019
Expense Ratio:0.96%0.81%
Total Net Assets:$101.00 Million  (3/31/21)
Category:Large Cap Blend
Benchmark:Morningstar U.S. Large-Mid Cap
Dividend Distribution:Quarterly
Related Material:
   Fund Fact Sheet Q1 2021
   PM Commentary Q1 2021
   Summary Prospectus
FUND OBJECTIVE & INVESTMENT PROCESS

The investment objective of the Buffalo Dividend Focus Fund is primarily current income, with long-term growth of capital as a secondary objective.

To pursue its investment objective, the Fund invests in dividend-paying equity securities, consisting of domestic common stocks, preferred stocks, and convertible securities. During normal market conditions, at least 80% of the Fund’s assets will be invested in dividend-paying equity securities, companies that declare and pay cash dividends on at least an annual basis.

While the Fund may invest in securities of companies of any size, the Fund managers expect the majority of common stocks purchased will be of large-cap companies, those with market capitalizations in excess of $10 billion at the time of initial purchase. In addition to investments in domestic securities, the Fund may invest up to 20% of its net assets in sponsored or unsponsored ADRs and securities of foreign companies that are traded on U.S. stock exchanges.

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We are focused on buying dividend-paying companies that can have sustainable competitive advantages, generate strong return on capital and free cash flow, have conservative balance sheets, and have great management teams.

We seek to buy these companies at reasonable valuations and believe that holding them for the long-term will generate favorable risk adjusted returns.

Paul Dlugosch, Portfolio Manager

Morningstar Rating

       

Overall Morningstar Rating™ of BUFDX based on risk-adjusted returns among 1,261 Large Blend funds as of 5/31/21.

Investment Style

Performance (%)

As of 5/31/213 MOYTD1 YR3 YR5 YRSince Inception
(12/3/12)
BUFFALO DIVIDEND FOCUS FUND - Investor9.5112.0939.1716.4215.3314.45
BUFFALO DIVIDEND FOCUS FUND - Institutional9.5512.1339.3816.5915.4914.62
  Morningstar U.S. Large-Mid Cap Index9.7311.7141.5718.7017.4416.17
  S&P 500 Index10.7212.6240.3218.0017.1616.05
  Morningstar Large Blend Category10.4212.9840.7016.2815.7213.84
As of 3/31/213 MOYTD1 YR3 YR5 YRSince Inception
(12/3/12)
BUFFALO DIVIDEND FOCUS FUND - Investor5.365.3654.2914.9914.3213.91
BUFFALO DIVIDEND FOCUS FUND - Institutional5.405.4054.5215.1614.4914.08
  Morningstar U.S. Large-Mid Cap Index5.565.5659.3117.3316.6415.73
  S&P 500 Index6.176.1756.3516.7816.2915.57
  Morningstar Large Blend Category6.746.7456.8014.8714.8013.37
For performance prior to 7/1/19 (Inception Date of Institutional Class), performance of the Investor Class shares is used and includes expenses not applicable and lower than those of Investor Class shares.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.
3 Year Risk Metrics
BUFDX vs Morningstar U.S. Large-Mid Cap Index (As of 3/31/21)
Upside Capture86.71
Downside Capture96.01
Alpha-1.18
Beta0.94
Sharpe Ratio0.77
Hypothetical Growth of $10,000
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.
Distributions
2021 Distribution Dates:


  • Record Date (6/17/21); Payment Date (6/18/21) – Ordinary Income & Capital Gains, if any

  • Record Date (9/17/21); Payment Date (9/20/21) – Ordinary Income & Capital Gains, if any

  • Record Date (12/2/21); Payment Date (12/3/21) – Capital Gains, if any

  • Record Date (12/17/21); Payment Date (12/20/21) – Ordinary Income, if any

Payable
Date
Distribution
NAV
Net Investment
Income
Short-Term Capital
Gains
Long-Term Capital
Gains
Distribution
Total
3/18/21$23.16 (Inv)

$23.16 (Inst)
$0.05098388

$0.05942821
-

-
-

-
$0.05098388

$0.05942821
12/18/20$21.72 (Inv)

$21.72 (Inst)
$0.00905139

$0.01801390
-

-
-

-
$0.00905139

$0.01801390
9/18/20$19.13 (Inv)

$19.13 (Inst)
$0.03170945

$0.03903915
-

-
-

-
$0.03170945

$0.03903915
6/18/20$18.26 (Inv)

$18.26 (Inst)
$0.03034499

$0.03590278
-

-
-

-
$0.03034499

$0.03590278
3/18/20$14.07 (Inv)

$14.07 (Inst)
$0.03107063

$0.03831320
-

-
-

-
$0.03107063

$0.03831320
12/18/19$18.82 (Inv)

$18.82 (Inst)
$0.04196909

$0.04964262
-

-
-

-
$0.04196909

$0.04964262
9/18/19$17.80 (Inv)

$17.80 (Inst)
$0.04731858

$0.05327159
-

-
-

-
$0.04731858

$0.05327159
6/18/19$17.20$0.06566509--$0.06566509
3/19/19$16.72$0.05232873--$0.05232873
12/18/18$15.33$0.08791977$0.02500$0.51339$0.62630977
9/18/18$17.96$0.05499230--$0.05499230
6/19/18$16.99$0.05791680--$0.05791680
3/20/18$16.72$0.04369471--$0.04369471
12/19/17$16.73$0.05315489$0.15204-$0.20519489
9/19/17$15.79$0.05107348--$0.05107348
6/20/17$15.53$0.04405814--$0.04405814
3/20/17$15.37$0.04662158--$0.04662158
12/20/16$14.58$0.04502534$0.06489$0.03508$0.14499534
9/20/16$13.78$0.04538819--$0.04538819
6/20/16$13.34$0.04391608--$0.04391608
3/18/16$13.15$0.04845082--$0.04845082
12/18/15$12.88$0.04061333$0.14263$0.11942$0.30266333
9/18/15$12.94$0.03816853--$0.03816853
6/18/15$14.29$0.04120635--$0.04120635
3/18/15$13.89$0.04200730--$0.04200730
12/18/14$13.53$0.03066401$0.54808$0.10086$0.67960401
9/18/14$13.50$0.02424009--$0.02424009
6/18/14$13.05$0.03496855--$0.03496855
3/18/14$12.11$0.03702784--$0.03702784
12/18/13$11.56$0.04725764$0.38271-$0.42996764
9/18/13$11.47$0.03960545--$0.03960545
6/18/13$11.13$0.03967611--$0.03967611
3/19/13$10.36$0.01492578--$0.01492578

Portfolio

Portfolio Characteristics
(As of 3/31/21) 
 
# of Holdings87
Median Market Cap$62.25 B
Weighted Average Market Cap$360.57 B
3-Yr Annualized Turnover Ratio24.31%
% of Holdings with Free Cash Flow64.47%
30-day SEC Yield0.98%
Top 10 Holdings
HoldingTicker / MaturitySector% of Net
Assets
AppleAAPLTechnology5.13%
MicrosoftMSFTTechnology4.81%
VisaVFinancial Services3.10%
UnitedHealth GroupUNHHealth Care2.15%
Edison IntlEIXUtilities2.10%
Horizon TherapeuticsHZNPHealth Care1.98%
AmazonAMZNConsumer Discretionary1.96%
Viper Energy PartnersVNOMEnergy1.91%
S&P GlobalSPGIFinancial Services1.85%
Cerence3.000%, 6/1/25Technology1.85%
TOP 10 HOLDINGS TOTAL26.84%
As of 12/31/20. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Fund holdings are subject to change and are not recommendations to buy or sell any securities.
Sector Weighting
As of 3/31/21. 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.
Market Capitalization
As of 3/31/21. Market Cap percentages may not equal 100% due to rounding.

Management

Paul Dlugosch, CFA
Portfolio Manager

24 Years of Experience

 View full bio

Jeff Sitzmann, CFA
Portfolio Manager

34 Years of Experience

 View full bio

Jeff Deardorff, CFA
Portfolio Manager

24 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 3/31/21) — Equity markets continued to move higher in the 1st quarter of 2021, with the S&P 500 Index returning 6.17%. The period was marked by outperformance of value stocks as the market rotation that began in the last quarter of 2020 became even more pronounced. The vaccination rollout, combined with prospects for more fiscal stimulus, bolstered optimism towards companies that could benefit from the economy reopening. Additionally, an 80+ basis point move higher in the 10-Year U.S. Treasury yield during the quarter left sentiment towards growth stocks relatively more subdued.

The broad market Russell 3000 Index advanced 6.35% in the quarter. Value outperformed growth for the second straight quarter, with the Russell 3000 Value Index up 11.89% compared to the Russell 3000 Growth Index returning 1.19%. Relative performance was inversely-correlated with market cap size in the quarter, with the Russell Micro Cap Index up 23.89%, the small cap Russell 2000 Index up 12.70%, the Russell Midcap Index up 8.14%, and the large cap Russell 1000 Index returning 5.91%. The more cyclically-sensitive Energy, Financial, and Industrial sectors performed best in the quarter. Consumer Staples, Information Technology, and Utilities were the bottom three performing sectors. All sectors produced positive returns.

PERFORMANCE COMMENTARY

(As of 3/31/21) — The Buffalo Dividend Focus Fund (BUFDX) posted a return of 5.36% in the quarter, underperforming the Morningstar U.S. Large-Mid Cap Index return of 5.56% and the S&P 500 Index return of 6.17%. With the exception of the portfolio’s Information Technology, Real Estate, and Utilities holdings, all sectors in the Fund and the benchmark Morningstar U.S. Large-Mid Cap Index posted positive returns. Portfolio sectors with the highest weightings (Information Technology, Health Care, and Financials) had mixed performance relative to the Index. Health Care and Financials had favorable performance, while Information Technology produced negative relative performance. The portfolio’s Communication Services, Consumer Discretionary, Consumer Staples, Energy, Industrials, and Materials sectors delivered constructive performance relative to the benchmark. The Fund’s Real Estate and Utilities holdings detracted from relative performance.

Top Contributors

Investments that contributed most positively to performance were Viper Energy Partners LP (VNOM), Horizon Therapeutics (HZNP), and Bank of America (BAC). Viper (oil and gas mineral interests) rose as energy prices moved higher on more balanced supply/demand and prospects for an economic rebound. Horizon (biopharmaceuticals) advanced on U.S. Food and Drug Administration (FDA) approval for increased manufacturing capacity for Tepezza (a thyroid eye disease drug), strong quarterly earnings, and acquisition of Viela Bio (VIE). Bank of America (financial services) climbed on rising interest rates, strong underwriting and trading revenues and prospects for an economic recovery.

Top Detractors

Apple (AAPL), Qualcomm (QCOM), and Viatris (VTRS) detracted from the Fund’s performance. After more than doubling in the past year, shares of Apple declined modestly on a cautious guidance, sector rotation, and concerns regarding increased regulation for big technology. Shares of Qualcomm (semiconductors and telecommunications equipment) fell after missing quarterly estimates hurt by near term supply constraints. Viatris (pharmaceutical) dropped after issuing guidance that was below Wall Street expectations.

OUTLOOK

(As of 3/31/21) — The S&P 500 Index achieved a record high during the period and ended just below the intra-quarter peak. The rise can be attributed to the expectation that the economy can recover from the COVID-19 pandemic. New COVID-19 infections, hospitalizations, and deaths have declined in the U.S. as vaccines have been approved and injected into arms. The market favorably reacted to the new administration, passage of additional fiscal stimulus, and the central banks’ continued accommodative policies. Although the Federal Reserve continues to indicate that interest rates increases are on hold for the near future, the longer end of the treasury market sold off on concerns that inflation will increase. The rise in bond yields resulted in some market rotation as investors shifted from growth to value sectors. As the year continues to unfold, investors will be focused on the administration’s recently announced infrastructure proposal, vaccine rollouts, COVID-19 related reopening, and the length of accommodative monetary policy.

Despite the uncertainty created by the pandemic, we remain focused on wide moat, large capitalization companies trading at reasonable valuations, in our view. As always, the Fund will continue to emphasize competitively advantaged companies that can be purchased at a fair value, in our opinion. As stock market volatility spikes, we will look for opportunities to find companies that fit our investment criteria, as we continue to follow our process of finding new investment ideas and to be ready when market declines provide better entry points.

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. Earnings growth is not representative of the fund’s future performance.

Literature

General Account
Forms
Investor
Class
Institutional
Class
Both
  New Account Application
  New Account Application - Entity
  Change or Add Account Details
  Cost Basis Method Election
  Power of Attorney
Individual Retirement Account (IRA) Forms
  IRA Account Application
  IRA Beneficiary Addition / Change
  IRA Required Minimum Distribution (RMD)
  IRA / Qualified Plan Distribution Request
  IRA Transfer
Coverdell Education Savings Accounts (ESA) Forms
  Coverdell ESA Application
  Coverdell ESA Distribution Request
  Coverdell ESA Transfer
Retirement Information
  Retirement Savings Options for Individuals

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.

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 Dividend Focus Fund (BUFDX) received 3 stars among 1,261 for the 3-year period and 3 stars among 1,098 Large Blend funds for the 5-year period ending 5/31/21.

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. ©2021 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. 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.

Early Stage Growth Fund

Early Stage Growth Fund

Quick Facts
InvestorInstitutional
Ticker:BUFOXBUIOX
Inception Date:5/21/20047/1/2019
Expense Ratio:1.51%1.37%
Total Net Assets:$131.77 Million  (3/31/21)
Category:Small Cap Growth
Benchmark:Morningstar U.S. Small Growth
Related Material:
   Fund Fact Sheet Q1 2021
   PM Commentary Q1 2021
   Summary Prospectus
Recent Media Coverage
Fund Objective & Investment Process

As of October 16, 2020, the name of the Buffalo Emerging Opportunities Fund changed to the Early Stage Growth Fund.

The investment objective of the Buffalo Early Stage Growth Fund is long-term growth of capital. The Fund invests primarily in equity securities, consisting of a portfolio of between 50-70 domestic common stocks, preferred stocks, convertible securities, warrants and rights, of companies that, at the time of purchase by the Fund, have market capitalizations below the median of the Fund’s benchmark index of $3.4 billion or less (as of September 30, 2020) and are companies that are starting to develop a new product or service or have recently developed a new product or service.

The Fund managers seek to identify companies for the Fund’s portfolio that are expected to experience growth based on the identification of long-term, measurable secular trends, and which, as a result, 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 premier early-stage growth companies which generally demonstrate:

  • Strong management teams
  • Little or no debt
  • Potential for increasing free cash flow
  • Scalable business models with a competitive advantage
  • Potential for increasing margins
  • Attractive risk/reward given the market framework
|

We believe investing in an actively-managed portfolio of premier, early-stage, growth companies could lead to growth of capital over time. We look for companies that could benefit from long-term industrial, technological, or general market trends, and are trading at what we view as attractive valuations.

Craig Richard, Portfolio Manager

Morningstar Rating

       

Overall Morningstar Rating™ of BUFOX based on risk-adjusted returns among 582 Small Growth funds as of 5/31/21.

Investment Style

Performance (%)

As of 5/31/213 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/21/04)
BUFFALO EARLY STAGE GROWTH FUND - Investor-1.859.8766.2524.2525.0416.8511.3111.47
BUFFALO EARLY STAGE GROWTH FUND - Institutional-1.819.9466.4424.4425.2317.0311.4811.64
  Morningstar U.S. Small Growth Index-5.98-1.5541.1315.8418.0513.0010.6910.91
  Morningstar Small Growth Category-0.258.9456.5818.4819.8613.3710.8710.51
As of 3/31/213 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/21/04)
BUFFALO EARLY STAGE GROWTH FUND - Investor7.627.62112.8625.8624.4716.8410.7011.45
BUFFALO EARLY STAGE GROWTH FUND - Institutional7.647.64113.2526.0524.6617.0110.8711.62
  Morningstar U.S. Small Growth Index-0.42-0.4281.9218.4819.4313.3610.2511.10
  Morningstar Small Growth Category6.936.9395.9720.4920.4613.4310.3310.52

*As of October 16, 2020, the name of the Buffalo Emerging Opportunities Fund changed to the Early Stage Growth Fund.

For performance prior to 7/1/19 (Inception Date of Institutional Class), performance of the Investor Class shares is used and includes expenses not applicable and lower than those of Investor Class shares.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.

3 Year Risk Metrics
BUFOX vs Morningstar U.S. Small Growth Index (As of 3/31/21)
Upside Capture115.27
Downside Capture92.31
Alpha6.82
Beta0.99
Sharpe Ratio0.97
Hypothetical Growth of $10,000
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.

Portfolio

Portfolio Characteristics
(As of 3/31/21) 
 
# of Holdings62
Median Market Cap$1.71 B
Weighted Average Market Cap$2.30 B
3-Yr Annualized Turnover Ratio36.80%
% of Holdings with Free Cash Flow64.06%
Active Share93.28%
Top 10 Holdings
HoldingTickerSector% of Net
Assets
8x8EGHTCommunications3.44%
Open Lending Corp.LPROFinancial Services2.82%
MimecastMIMETechnology2.69%
OmnicellOMCLHealth Care2.35%
CerenceCRNCTechnology2.29%
Advanced Drainage SystemsWMSIndustrials2.28%
Varonis SystemsVRNSTechnology2.23%
dMY Technology GroupDMYDFinancial Services2.20%
ShutterstockSSTKCommunications2.07%
Willdan GroupWLDNReal Estate2.04%
TOP 10 HOLDINGS TOTAL24.41%
As of 12/31/20. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Fund holdings are subject to change and are not recommendations to buy or sell any securities.
Sector Weighting
As of 3/31/21. 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.
Market Capitalization
As of 3/31/21. Market Cap percentages may not equal 100% due to rounding.

Management

Craig Richard, CFA
Portfolio Manager

19 Years of Experience

 View full bio

Doug Cartwright, CFA
Portfolio Manager

15 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 3/31/21) — Equity markets continued to move higher in the 1st quarter of 2021, with the S&P 500 Index returning 6.17%. The period was marked by outperformance of value stocks as the market rotation that began in the last quarter of 2020 became even more pronounced. The vaccination rollout, combined with prospects for more fiscal stimulus, bolstered optimism towards companies that could benefit from the economy reopening. Additionally, an 80+ basis point move higher in the 10-Year U.S. Treasury yield during the quarter left sentiment towards growth stocks relatively more subdued.

The broad market Russell 3000 Index advanced 6.35% in the quarter. Value outperformed growth for the second straight quarter, with the Russell 3000 Value Index up 11.89% compared to the Russell 3000 Growth Index returning 1.19%. Relative performance was inversely-correlated with market cap size in the quarter, with the Russell Micro Cap Index up 23.89%, the small cap Russell 2000 Index up 12.70%, the Russell Midcap Index up 8.14%, and the large cap Russell 1000 Index returning 5.91%. The more cyclically-sensitive Energy, Financial, and Industrial sectors performed best in the quarter. Consumer Staples, Information Technology, and Utilities were the bottom three performing sectors. All sectors produced positive returns.

PERFORMANCE COMMENTARY

(As of 3/31/21) — During the quarter the Buffalo Early Stage Growth Fund (BUFOX) generated a return of 7.62%. This result exceeded the Fund’s primary benchmark (Morningstar U.S. Small Growth Index) return of -0.42%. The Russell 2000 Growth Index returned 4.88%.

On a trailing 12 month basis, the Fund returned 112.86%. This compared favorably to the primary benchmark return of 81.92% and the Russell 2000 Growth Index return of 90.20%.

The March 2021 quarter continued to drive positive market returns following a historic December quarter. The U.S. has moved closer towards COVID-19 herd immunity, as more than 50% of the adult population has had at least one vaccine dose. As a result, the potential runway for economic growth is becoming clearer for 2021 and beyond. Additionally, another fiscal stimulus bill to the tune of $1.9 billion was signed in March and provides further support for the economic outlook in the U.S.

The Fund’s outperformance in the quarter was driven by solid returns versus the benchmark in the Consumer Discretionary and Health Care sectors, with Fund returns of 14.7% and 20.5%, respectively, in those sectors.

Individual standouts in the quarter included Mohawk Group Holdings and Sleep Number. Mohawk is a new consumer economy play, creating brands for online purchasing only, primarily on Amazon. Mohawk uses artificial intelligence and data analytics to discover consumer categories online where there is an opportunity for a new entrant to take market share. Focusing on user product reviews, customer service, product quality, and real-time pricing, Mohawk has created category sales leaders on Amazon in kitchen appliances, environmental appliances, beauty products, and consumer electronics. Additionally, Mohawk has begun to use its platform to scale the business by acquiring other Amazon sellers at very attractive valuations and layering them on to Mohawk’s highly automated technology platform. Mohawk is in the early innings of this consolidation play and has ample opportunity remaining.

Sleep Number is a mattress company known for layering technology and analytics into their product offering. Demand remains strong for their Sleep 360 smart beds launched several years ago. Sleep Number beds track heart rate, breathing, sleep/wake cycles, and overall sleep health, all reported through a free app for devices such as smartphones. The pandemic has served to refocus many people on their overall health, and sleep health has become a focal point for many. The demand environment has remained strong and we believe the company will likely continue leading the pack in technology innovation in the mattress industry.

The Fund ended the quarter with 64 holdings. We added 6 new holdings and sold out of 7 during the period. Of note, 4 of the 7 holdings sold out of the Fund departed due to being acquired by a larger competitor or private equity.

OUTLOOK

(As of 3/31/21) — The successful vaccine rollouts in the U.S. along with continued monetary and fiscal stimulus has created a strong outlook for the domestic economy for the remainder of 2021. COVID-19 hospitalizations are down to 35,000 currently, from a high of 125,000 in early January, and almost 70% of the most susceptible population (those over 65) have been fully vaccinated. Additionally, additional stimulus of $1.9 billion was passed in early March that provided more direct payments to households in the U.S. Coupled with Federal Reserve statements of continuing monetary policy support, the economic landscape remains favorable. Personal incomes, checking/savings account balances, and money market fund balances are at record levels. This continues to provide strong support for equity prices in the near future.

With the strong recovery in equity markets given the economic backdrop mentioned above, we are vigilant of where valuation multiples stand across our holdings. Additionally, we are concerned about the possibility for accelerating price inflation.

Regardless of all the backdrop we are presented with, our job remains to find attractive small cap companies that have not been fully appreciated by the market or are mispriced due to recent results or events. We believe less investor interest in our segment of the market creates opportunity for us to uncover value.

The Fund typically invests at the smaller end of the small cap growth spectrum, and the managers continue to seek companies with sustainable growth, due to secular growth trends or innovative or disruptive products.

The Buffalo Early Stage Growth Fund is focused primarily on identifying innovation within U.S. companies with primarily North American revenue bases. With an active share of greater than 95%, the Fund will continue to offer a distinct offering from the benchmark Index and category peers.

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. Earnings growth is not representative of the fund’s future performance.

Literature

General Account
Forms
Investor
Class
Institutional
Class
Both
  New Account Application
  New Account Application - Entity
  Change or Add Account Details
  Cost Basis Method Election
  Power of Attorney
Individual Retirement Account (IRA) Forms
  IRA Account Application
  IRA Beneficiary Addition / Change
  IRA Required Minimum Distribution (RMD)
  IRA / Qualified Plan Distribution Request
  IRA Transfer
Coverdell Education Savings Accounts (ESA) Forms
  Coverdell ESA Application
  Coverdell ESA Distribution Request
  Coverdell ESA Transfer
Retirement Information
  Retirement Savings Options for Individuals

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.

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 Early Stage Growth Fund (BUFOX) received 4 stars among 582 for the three-year, 4 stars among 506 for the five-year, and 5 stars among 385 Small Growth funds for the ten-year period ending 5/31/21.

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. ©2021 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. 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.

Flexible Income Fund

Flexible Income Fund

Quick Facts
InvestorInstitutional
Ticker:BUFBXBUIBX
Inception Date:8/12/19947/1/2019
Expense Ratio:1.02%0.87%
Total Net Assets:$425.68 Million  (3/31/21)
Category:Large Cap Value
Benchmark:Morningstar Moderately Aggressive Target Risk
Dividend Distribution:Monthly
Related Material:
   Fund Fact Sheet Q1 2021
   PM Commentary Q1 2021
   Summary Prospectus
Fund Objective & Investment Process

The investment objective of the Buffalo Flexible Income Fund is primarily the generation of high current income and, as a secondary objective, the long-term growth of capital.

To pursue its investment objectives, the Flexible Income Fund invests in both debt and equity securities.

The allocation of assets invested in each type of security is designed to balance income and long-term capital appreciation with reduced volatility of returns. The Flexible Income Fund expects to change its allocation mix over time based on the Fund managers’ view of economic conditions and underlying security values.

 ▼
|
Our investment strategy seeks to generate yield for any investor needing monthly income with capital appreciation, and we use many methods to address potential downside risks.

John Kornitzer, Portfolio Manager

Morningstar Rating

       

Overall Morningstar Rating™ of BUFBX based on risk-adjusted returns among 140 Allocation 85%+ Equity funds as of 5/31/21.

Investment Style

Performance (%)

As of 5/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(8/12/94)
BUFFALO FLEXIBLE INCOME FUND - Investor10.2715.5928.697.598.827.527.036.657.34
BUFFALO FLEXIBLE INCOME FUND - Institutional10.3115.6728.907.738.977.677.196.817.50
  Morningstar Moderately Aggressive Target Risk Index7.539.4534.7612.4412.499.187.987.75-
  Combined Index
    Morningstar U.S. Large Cap Index (60%)
    ICE BofAML U.S. High Yield Index (40%)
6.61
9.97
1.56
7.46
10.89
2.31
29.47
39.01
15.18
14.01
18.82
6.79
13.62
17.88
7.24
11.35
14.75
6.25
9.37
10.78
7.27
7.88
8.20
7.41
9.30
10.54
7.43
  Lipper Mixed-Asset Target Allocation Moderate Funds Index6.017.3325.6510.629.867.686.555.967.36
  Morningstar Allocation 85%+ Equity Category8.3712.0942.5713.2413.3010.207.686.747.97
As of 3/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(8/12/94)
BUFFALO FLEXIBLE INCOME FUND - Investor9.119.1140.946.867.827.126.686.757.16
BUFFALO FLEXIBLE INCOME FUND - Institutional9.239.2341.157.027.997.286.846.917.32
  Morningstar Moderately Aggressive Target Risk Index4.084.0845.1310.9611.818.847.557.82-
  Combined Index
    Morningstar U.S. Large Cap Index (60%)
    ICE BofAML U.S. High Yield Index (40%)
3.26
4.83
0.90
3.26
4.83
0.90
42.54
55.35
23.31
13.29
17.80
6.53
13.41
17.06
7.94
11.11
14.31
6.31
9.04
10.25
7.21
7.94
8.33
7.35
9.20
10.38
7.42
  Lipper Mixed-Asset Target Allocation Moderate Funds Index3.153.1533.649.519.347.466.226.017.25
  Morningstar Allocation 85%+ Equity Category6.306.3057.9911.7712.379.797.136.937.80
For performance prior to 7/1/19 (Inception Date of Institutional Class), performance of the Investor Class shares is used and includes expenses not applicable and lower than those of Investor Class shares.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.
Hypothetical Growth of $10,000
This chart illustrates the performance of a hypothetical $10,000 investment made in the Fund on the inception date of the benchmark index (1/1/99). Assumes reinvestment of dividends and capital gains. This chart does not imply future performance.
Distributions
2021 Distribution Dates:

— Record Date (6/17/21); Payment Date (6/18/21) – Ordinary Income & Capital Gains, if any

— Record Date (7/19/21); Payment Date (7/20/21) – Ordinary Income & Capital Gains, if any

— Record Date (8/17/21); Payment Date (8/18/21) – Ordinary Income & Capital Gains, if any

— Record Date (9/17/21); Payment Date (9/20/21) – Ordinary Income & Capital Gains, if any

— Record Date (10/18/21); Payment Date (10/19/21) – Ordinary Income & Capital Gains, if any

— Record Date (11/17/21); Payment Date (11/18/21) – Ordinary Income & Capital Gains, if any

— Record Date (12/2/21); Payment Date (12/3/21) – Capital Gains, if any

— Record Date (12/17/21); Payment Date (12/20/21) – Ordinary Income, if any
Record
Date
Payable
Date
Distribution
NAV
Net Investment
Income
Short-Term Capital
Gains
Long-Term Capital
Gains
Distribution
Total
5/17/215/18/21$17.19 (Inv)

$17.18 (Inst)
$0.02426012

$0.02622444
-

-
-

-
$0.02426012

$0.02622444
4/19/214/20/21$16.65 (Inv)

$16.64 (Inst)
$0.00847721

$0.01071978
-

-
-

-
$0.00847721

$0.01071978
3/17/213/18/21$16.01 (Inv)

$16.00 (Inst)
$0.03984988

$0.04170871
-

-
-

-
$0.03984988

$0.04170871
2/17/212/18/21$15.82 (Inv)

$15.82 (Inst)
$0.03172344

$0.03362171
-

-
-

-
$0.03172344

$0.03362171
1/19/211/20/21$15.71 (Inv)

$15.70 (Inst)
$0.01013286

$0.01221186
-

-
-

-
$0.01013286

$0.01221186
For historical distributions, click here.

Portfolio

Portfolio Characteristics
(As of 3/31/21) 
 
# of Equity Holdings48
# of Fixed Holdings2
Median Market Cap$72.83 B
Weighted Average Market Cap$256.78 B
3-Yr Annualized Turnover Ratio4.51%
Average Duration0.28 years
Average Maturity9.65 years
30-day SEC Yield2.03%
Top 10 Holdings
HoldingTicker / MaturitySector% of Net
Assets
MicrosoftMSFTTechnology7.82%
Nuance Communications11/1/35, 1.500%Communications3.99%
QualcommQCOMTechnology3.30%
Costco WholesaleCOSTConsumer Staples3.18%
ChevronCVXEnergy3.05%
Johnson & JohnsonJNJHealth Care3.03%
IntelINTCTechnology3.00%
Truist FinancialTFCFinancial Services2.89%
Digital Realty TrustDLRReal Estate2.87%
PepsiCoPEPConsumer Staples2.86%
TOP 10 HOLDINGS TOTAL35.99%
As of 12/31/20. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Fund holdings are subject to change and are not recommendations to buy or sell any securities.
Sector Weighting
As of 3/31/21. 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.
Asset Allocation
As of 3/31/21. Allocation percentages may not equal 100% due to rounding.

Management

John Kornitzer
Portfolio Manager

53 Years of Experience

 View full bio

Paul Dlugosch, CFA
Portfolio Manager

24 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 3/31/21) — Equity markets continued to move higher in the 1st quarter of 2021, with the S&P 500 Index returning 6.17%. The period was marked by outperformance of value stocks as the market rotation that began in the last quarter of 2020 became even more pronounced. The vaccination rollout, combined with prospects for more fiscal stimulus, bolstered optimism towards companies that could benefit from the economy reopening. Additionally, an 80+ basis point move higher in the 10-Year U.S. Treasury yield during the quarter left sentiment towards growth stocks relatively more subdued.

The broad market Russell 3000 Index advanced 6.35% in the quarter. Value outperformed growth for the second straight quarter, with the Russell 3000 Value Index up 11.89% compared to the Russell 3000 Growth Index returning 1.19%. Relative performance was inversely-correlated with market cap size in the quarter, with the Russell Micro Cap Index up 23.89%, the small cap Russell 2000 Index up 12.70%, the Russell Midcap Index up 8.14%, and the large cap Russell 1000 Index returning 5.91%. The more cyclically-sensitive Energy, Financial, and Industrial sectors performed best in the quarter. Consumer Staples, Information Technology, and Utilities were the bottom three performing sectors. All sectors produced positive returns.

PERFORMANCE COMMENTARY

(As of 3/31/21) — The Buffalo Flexible Income Fund (BUFBX) produced a return of 9.11% in the quarter, outperforming the Morningstar Moderately Aggressive Target Risk Index return of 4.08%. The top three contributors to the Fund’s performance during the quarter were Hess, Chevron, and ConocoPhillips. All of these companies experienced significant price appreciation as oil prices increased due to the improved outlook for global travel and the corresponding potential for an increase in oil consumption. The top three detractors were Costco, Clorox, and Pepsi. Stocks most leveraged to rising interest rates, a steepening yield curve, and reopening did relatively better, while pricey, more crowded beneficiaries of COVID lockdowns experienced some investor rotation away.

OUTLOOK

(As of 3/31/21) — The S&P 500 Index achieved a record high during the period and ended just below the intra-quarter peak. The rise can be attributed to the expectation that the economy can recover from the COVID-19 pandemic. New COVID-19 infections, hospitalizations, and deaths have declined in the U.S. as vaccines have been approved and injected into arms. The market favorably reacted to the new administration, passage of additional fiscal stimulus, and the central banks’ continued accommodative policies. Although the Federal Reserve continues to indicate that interest rates increases are on hold for the near future, the longer end of the treasury market sold off on concerns that inflation will increase. The rise in bond yields resulted in some market rotation as investors shifted from growth to value sectors. As the year continues to unfold, investors will be focused on the administration’s recently announced infrastructure proposal, vaccine rollouts, COVID-19 related reopening, and the length of accommodative monetary policy.

Despite the uncertainty created by the pandemic, we remain focused on wide moat, large capitalization dividend paying companies trading at reasonable valuations, in our view. As stock market volatility spikes, we will look for opportunities to find companies that fit our investment criteria, as we continue to follow our process of finding new investment ideas and to be ready when market declines provide better entry points.

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. Earnings growth is not representative of the fund’s future performance.

Literature

General Account
Forms
Investor
Class
Institutional
Class
Both
  New Account Application
  New Account Application - Entity
  Change or Add Account Details
  Cost Basis Method Election
  Power of Attorney
Individual Retirement Account (IRA) Forms
  IRA Account Application
  IRA Beneficiary Addition / Change
  IRA Required Minimum Distribution (RMD)
  IRA / Qualified Plan Distribution Request
  IRA Transfer
Coverdell Education Savings Accounts (ESA) Forms
  Coverdell ESA Application
  Coverdell ESA Distribution Request
  Coverdell ESA Transfer
Retirement Information
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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.

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 Flexible Income Fund (BUFBX) received 1 star among 140 for the 3-year, 1 star among 127 for the 5-year, and 1 star among 89 Allocation 85%+ Equity funds for the 10-year period ending 5/31/21.

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. ©2021 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. 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.

Bond ratings are grades given to bonds that indicates their credit quality as determined by a private independent rating service such as [Standard & Poor’s or Moody’s, etc.]. The firm evaluates a bond issuer’s financial strength, or its ability to pay a bond’s principal and interest in a timely fashion. Ratings are expressed as letters ranging from ‘AAA’, which is the highest grade, to ‘D’, which is the lowest grade. Not Rated category includes holdings that are not rated by any rating agencies.
Growth Fund

Growth Fund

Quick Facts
InvestorInstitutional
Ticker:BUFGXBIIGX
Inception Date:5/19/19957/1/2019
Expense Ratio:0.93%0.79%
Total Net Assets:$198.46 Million  (3/31/21)
Category:Large Cap Growth
Benchmark:Morningstar U.S. Growth
Related Material:
   Fund Fact Sheet Q1 2021
   PM Commentary Q1 2021
   Summary Prospectus
Fund Objective & Investment Process

The investment objective of the Buffalo Growth Fund is long-term growth of capital. The Growth Fund invests in domestic common stocks and other U.S. equity securities, including preferred stock, convertible securities, warrants and rights, with a goal of maintaining at least 75% of the equity weighting of the Fund’s portfolio in companies with market capitalizations greater than $5 billion or the median of the Morningstar U.S. Growth Index, whichever is lower. Capitalization of the Morningstar U.S. Growth Index changes due to market conditions and index composition.

With respect to the remaining 25% of the equity weighting of the Fund’s portfolio, the Fund may invest in companies of any size, including, but not limited to, those with market capitalizations less than the lower of the median of the Morningstar U.S. Growth Index or $5 billion.

The Fund managers seek to identify companies 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.

ESG Integration

Management of the Buffalo Growth Fund integrates ESG (Environmental, Social, and Governance) related factors into the investment decision making process. ESG-related factors material to the risk and return of investments are explicitly considered, alongside traditional financial factors, when making investment decisions.

Learn More About ESG Integration

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The Growth Fund invest in secular trend leaders: attractively-priced, financially-strong, well-managed companies across all market cap segments, which we believe are favorably positioned to harvest the lion’s share of big secular growth trends.

Dave Carlsen, CFA, Co-Portfolio Manager

Morningstar Rating

       

Overall Morningstar Rating™ of BUFGX based on risk-adjusted returns among 1,141 Large Growth funds as of 5/31/21.

Investment Style

Performance (%)

As of 5/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO GROWTH FUND - Investor7.957.1134.7918.5218.2913.9611.729.1611.20
BUFFALO GROWTH FUND - Institutional8.037.1935.0518.7018.4714.1311.899.3211.36
  Morningstar U.S. Growth Index5.256.3939.6524.1922.7217.1512.898.60-
  Lipper Large Cap Growth Fund Index6.687.5139.6922.4421.7915.9011.888.299.85
  Morningstar Large Growth Category5.707.0640.2520.9020.4115.2311.738.829.83
As of 3/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO GROWTH FUND - Investor0.810.8153.9818.75
17.0913.6311.019.3011.01
BUFFALO GROWTH FUND - Institutional0.840.8454.2618.9317.2613.8011.189.4611.18
  Morningstar U.S. Growth Index0.610.6164.4523.9121.8116.7012.129.01-
  Lipper Large Cap Growth Fund Index1.571.5762.6922.0320.9715.4411.098.509.68
  Morningstar Large Growth Category2.232.2363.5720.4419.4214.7310.969.079.69
For performance prior to 7/1/19 (Inception Date of Institutional Class), performance of the Investor Class shares is used and includes expenses not applicable and lower than those of Investor Class shares.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.
3 Year Risk Metrics
BUFGX vs Morningstar U.S. Growth Index (As of 3/31/21)
Upside Capture80.78
Downside Capture97.93
Alpha-2.73
Beta0.93
Sharpe Ratio0.94
Hypothetical Growth of $10,000
This chart illustrates the performance of a hypothetical $10,000 investment made in the Fund on the inception date of the benchmark index (6/30/97). This chart does not imply future performance.

Portfolio

Portfolio Characteristics
(As of 3/31/21) 
 
# of Holdings53
Median Market Cap$99.10 B
Weighted Average Market Cap$620.73 B
3-Yr Annualized Turnover Ratio26.81%
% of Holdings with Free Cash Flow88.46%
Active Share54.92%
Top 10 Holdings
Name of HoldingTickerSector% of Net
Assets
MicrosoftMSFTTechnology9.97%
AmazonAMZNConsumer Discretionary6.65%
AppleAAPLTechnology6.22%
Alphabet (C)GOOGTechnology3.32%
MastercardMAFinancials3.24%
FacebookFBTechnology2.88%
Alphabet (A)GOOGLTechnology2.77%
The Walt Disney CoDISCommunications2.55%
VisaVFinancials2.17%
Home DepotHDConsumer Discretionary2.12%
TOP 10 HOLDINGS TOTAL41.89%
As of 12/31/20. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Fund holdings are subject to change and are not recommendations to buy or sell any securities.
Sector Weighting
As of 3/31/21. 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.
Market Capitalization
As of 3/31/21. Market Cap percentages may not equal 100% due to rounding.

Management

Dave Carlsen, CFA
Portfolio Manager

29 Years of Experience

 View full bio

Josh West, CFA
Portfolio Manager

16 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 3/31/21) — Equity markets continued to move higher in the 1st quarter of 2021, with the S&P 500 Index returning 6.17%. The period was marked by outperformance of value stocks as the market rotation that began in the last quarter of 2020 became even more pronounced. The vaccination rollout, combined with prospects for more fiscal stimulus, bolstered optimism towards companies that could benefit from the economy reopening. Additionally, an 80+ basis point move higher in the 10-Year U.S. Treasury yield during the quarter left sentiment towards growth stocks relatively more subdued.

The broad market Russell 3000 Index advanced 6.35% in the quarter. Value outperformed growth for the second straight quarter, with the Russell 3000 Value Index up 11.89% compared to the Russell 3000 Growth Index returning 1.19%. Relative performance was inversely-correlated with market cap size in the quarter, with the Russell Micro Cap Index up 23.89%, the small cap Russell 2000 Index up 12.70%, the Russell Midcap Index up 8.14%, and the large cap Russell 1000 Index returning 5.91%. The more cyclically-sensitive Energy, Financial, and Industrial sectors performed best in the quarter. Consumer Staples, Information Technology, and Utilities were the bottom three performing sectors. All sectors produced positive returns.

PERFORMANCE COMMENTARY

(As of 3/31/21) — The Buffalo Growth Fund (BUFGX) gained 0.81% during the 1st quarter, outperforming the Morningstar U.S. Growth Index’s return of 0.61%. Strong stock selection in the Consumer Discretionary, Health Care, and Real Estate sectors were the biggest contributors to outperformance relative to the Index. All remaining sectors also contributed positively relative to the Index at a more modest effect. Cash averaged 1.38% of Fund assets in the quarter. Stocks most leveraged to rising interest rates, a steepening yield curve, and reopening did relatively better while pricey, more crowded beneficiaries of COVID lockdowns and digital transformation experienced some investor rotation away.

TOP CONTRIBUTORS

Microsoft Corporation, the top contributor to the Fund during the quarter, continued its streak of beating and raising expectations for revenue and earnings per share (EPS). The company is a prime beneficiary of workplace digital transformation and the move from on-premise IT infrastructure to the cloud. As the economy emerges from the pandemic, Microsoft is well positioned to gain share of rising IT budgets.

Alphabet Inc. was also a top contributor in the quarter. The company experienced improving growth in its leading digital advertising businesses following a relatively cautious ad budget environment through most of last year. Alphabet is poised to benefit in 2021 as digital advertising budgets expand alongside improving economic conditions.

TOP DETRACTORS

Apple Inc. shares declined modestly in the quarter, after more than doubling in the last nine months of 2020, as news of downwardly revised iPhone build expectations emerged intra-quarter. Weaker consumer demand in China and supply chain component shortages are thought to have led to the lower build expectations. The company remains well positioned to benefit from the 5G handset product cycle and a favorable mix shift to high margin digital services.

Amazon.com, Inc. shares were relatively weak, despite strong results and upward earnings revisions, as investors rotated toward more cyclical reopening beneficiaries. In the near term, some investors worry the pandemic has pulled forward ecommerce adoption contributing to above trend growth rates in 2020 that may moderate going forward. Over the long run, Amazon should continue to disrupt markets and sustain an attractive growth rate as its Amazon Web Services and leadership position in ecommerce capture additional share gains from on-premise computing and off-line commerce.

OUTLOOK

(As of 3/31/20) — The market environment remains constructive for active growth stock investing, in our view. Interest rates and inflation remain relatively low by historical standards, providing a healthy backdrop for corporate earnings growth and investors’ allocation to equities. Meanwhile, global central bankers have pledged to sustain aggressive monetary and fiscal stimulus measures to ward off deflation and spur along continued economic recovery. Recent improvement in vaccine availability has accelerated shots-in-arms and is a much-needed spark that should help ignite economic recovery and a return to normalcy. We are seeing mobility and economic activity levels begin to rebound across many countries and sectors. Consumer and business confidence is rising too as the world has found innovative ways to adapt, progress, and grow despite the one-hundred-year pandemic still in our midst.

We are constructive about continued recovery and believe a rising and strengthening economic tide is likely to materialize in 2021 producing above average gross domestic product (GDP) growth. The market should continue to broaden out as more sectors of the economy recover and as under-appreciated growth and/or operating leverage materialize. Under-appreciated is key. Compared to history, valuations are higher than normal in the early stages of this economic recovery due to the faith placed in the ability of unprecedented fiscal and monetary stimulus to ignite and sustain earnings recovery. Interest rates are lower too in support of higher valuations, and we are likely to embark on a period of rising revenue and earnings expectations on relatively easy growth comparisons, which is fuel for optimism and sustained multiples.

For 2021, we believe there’s ample room for earnings upside in our investable universe and are constructive on the prospects for the portfolio. On a broader level, earnings growth expectations for 2021 S&P 500 Index earnings are reasonable at about $175 per share, 26% higher than 2020’s COVID-impacted earnings but only about 9% higher than pre-pandemic earnings in 2019, implying about 4.5% cumulative annualized growth over the two-year period. 2022 S&P 500 Index earnings expectations at about $201 per share again imply a reasonable 7.8% cumulative annualized growth rate expected over the 2019 to 2022 period.

As we get deeper into recovery and positive estimate revisions slow, the interplay between interest rates and stock market multiples will likely wax more prominently, while concerns about high debt levels and rising tax rates could also begin to affect broader valuation levels. That said, we think under-appreciated growth and operating leverage will be ample and rewarded throughout 2021.

Economic conditions may ebb and flow, but our focus remains constant; we invest in attractively-priced, financially-strong, well-managed companies benefiting from secular growth opportunities, in our opinion. Thank you for your support.

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. Investing in both actively and passively managed mutual funds involves risk and principal loss is possible. Earnings growth is not representative of the fund’s future performance.

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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.

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 Growth Fund (BUFGX) received 2 stars among 1,141 for the 3-year, 2 stars among 1,028 for the 5-year, and 2 stars among 758 Large Growth funds for the 10-year period ending 5/31/21.

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. ©2021 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. 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.