Discovery Fund

Discovery Fund

Quick Facts
Investor Institutional
Ticker: BUFTX BUITX
Daily Pricing:  
As of 3/28/2024  
NAV: $25.50 $25.72
$ Change: $0.10 $0.10
% Change:
0.39% 0.39%
YTD:
6.29% 6.32%
Inception Date: 4/16/2001 7/1/2019
Expense Ratio: 1.01% 0.86%
Total Net Assets: $787.07 Million  (9/30/23)
Morningstar Category: Mid Cap Growth
Benchmark Index: Russell Midcap Growth
Related Material:
   Fund Fact Sheet Q4 2023
   PM Commentary Q4 2023
   Portfolio Manager Q&A
FUND OBJECTIVE & INVESTMENT PHILOSOPHY

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.

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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, Portfolio Manager

Morningstar Ratings

     

Overall Morningstar Rating™ of BUFTX based on risk-adjusted returns among 523 Midcap Growth funds as of 2/29/24.

Performance (%)

As of 2/29/243 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO DISCOVERY FUND - Investor13.294.1319.24-0.069.289.6115.5710.199.27
BUFFALO DISCOVERY FUND - Institutional13.364.1819.430.109.459.7715.7410.369.43
  Russell Midcap Growth Index15.056.9425.033.1311.5910.8816.1610.279.47
As of 12/31/233 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO DISCOVERY FUND - Investor14.8924.3024.30-0.2611.819.7214.5410.419.14
BUFFALO DISCOVERY FUND - Institutional14.9224.5024.50-0.1111.989.8914.7110.579.31
  Russell Midcap Growth Index14.5525.8725.871.3113.8110.5714.6810.179.22

2013201420152016201720182019202020212022
BUFFALO DISCOVERY FUND - Investor36.6110.685.645.5625.44-6.5431.6333.8111.90-28.67
BUFFALO DISCOVERY FUND - Institutional36.8210.855.805.7225.62-6.4031.8234.0312.07-28.57
  Russell Midcap Growth Index35.7411.90-0.207.3325.27-4.7535.4735.5912.73-26.72
  Morningstar U.S. Mid Growth Index34.079.77-0.716.4625.67-3.1636.0146.1714.97-32.37
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
BUFTX vs Russell Midcap Growth Index (As of 12/31/23)
Upside Capture99.48
Downside Capture103.13
Alpha-1.45
Beta0.99
Sharpe Ratio-0.12
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 12/31/23) 
 
# of Holdings87
Median Market Cap$23.30 B
Weighted Average Market Cap$32.10 B
3-Yr Annualized Turnover Ratio38.93%
% of Holdings with Free Cash Flow87.36%
Active Share72.97%
Top 10 Holdings
HoldingTickerSector% of Net
Assets
MSCI Inc. Class AMSCIFinancials3.12
IQVIA Holdings IncIQVHealth Care2.68
Martin Marietta Materials, Inc.MLMMaterials2.25
DoubleVerify Holdings, Inc.DVInformation Technology2.24
Ingersoll Rand Inc.IRIndustrials2.05
CoStar Group, Inc.CSGPIndustrials2.04
AMETEK, Inc.AMEIndustrials2.03
TransUnionTRUIndustrials1.91
CrowdStrike Holdings, Inc.CRWDInformation Technology1.68
Copart, Inc.CPRTIndustrials1.66
TOP 10 HOLDINGS TOTAL21.67%
As of 12/31/23. 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 12/31/23. 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 12/31/23. Market Cap percentages may not equal 100% due to rounding.

Management

Dave Carlsen, CFA
Portfolio Manager

31 Years of Experience

 View full bio

Commentary

PERFORMANCE COMMENTARY

(As of 12/31/23)

The Buffalo Discovery Fund rose 14.89% for the quarter versus an advance of 14.55%
for the Russell Midcap Growth Index. Outperformance was driven by our holdings
in the Financials, Communication Services, and Materials sectors. Stocks reacted
positively to improving inflation data, resilient consumer spending, and a significant
decline in the 10-year Treasury yield. The positive news flow culminated with Federal
Reserve Chairman Powell’s dovish speech in mid-December that suggested the hiking
cycle is finished and cuts to short-term interest rates are on the way in 2024.

The rally was broad-based except for the energy sector, which gave back nearly all its
strong third quarter performance gains. Consumer Staples were also a relative laggard
versus the broader market during the quarter, marking that sector’s third consecutive
quarter of underperformance. Staples stocks continue to be weighed down by weak
grocery volumes and shoppers trading down to private label products.

It was clearly a “risk-on” quarter and a strong end to the year for stocks. While the
economy is clearly slowing, investors were encouraged that inflation is progressing
towards the Fed’s 2% target while consumer spending continues to increase,
supported by low unemployment and rising wages. A deep recession appears increasingly unlikely as the Fed stands ready to cut interest rates whenever it believes
economic stimulus is needed. Plenty of macro risks remain, however, and valuations
in certain segments of the market are beginning to look frothy. Through all the noise
and uncertainty, the Discovery Fund remains focused on its core mission: to invest in
high-quality, disruptive growth companies that use innovation to gain share and create
competitive advantage, all while maintaining a consistent discipline around valuation
and risk. We believe this is a strategy that will continue to deliver attractive risk-adjusted
returns over time.

Top Contributors
CrowdStrike (CRWD) was the largest contributor to performance with shares climbing
more than 50% during the quarter. CrowdStrike provides businesses with cloud-based
cybersecurity solutions, and investors reacted positively to strong quarterly results
and a promising outlook. The company beat consensus expectations for revenue and
EBITDA, spoke to an improving new-business win rate, and was encouraged by recent
product launches in cloud security and identity protection. This allowed management
to raise its full-year sales and earnings guidance despite a challenging economic
environment. Cybersecurity is an industry with secular growth tailwinds, and we believe
CrowdStrike should continue to gain market share.

Expedia (EXPE) was another top contributor with shares rising 47% during the quarter.
The company is an online travel platform with brands that include Expedia, Vrbo, and
Hotels.com. Third quarter results were modestly ahead of consensus and the company
made two announcements that received an enthusiastic response from investors.
First, the company announced it had finally completed a multiyear effort to put its
tech stack on a common platform and migrate it to the cloud. Second, the company
surprised investors with a $5 billion share repurchase announcement. At the time of the
announcement, the repurchase plan accounted for 40% of the company’s market cap.
Despite the 50% move in its share price, Expedia continues trades at just 14x earnings
and benefits from rising penetration of online travel spending.

Top Detractors
Aptiv (APTV) was the top detractor for the quarter. The company is a supplier to the
automotive industry with products that support electrical architectures, safety/perception
systems, mobile connectivity, and in-vehicle software. Shares declined 9% during the
quarter, driven by earnings guidance that came in below consensus estimates. Investors
are concerned that weakness will drag into 2024 due to weakening global economies and
moderating demand for electric vehicles. While there are certainly near-term concerns
around the macro environment, Aptiv continues to gain market share and its products will
launch on several new platforms in 2024. The company has a strong balance sheet, and
we believe share repurchases are likely to increase given the current equity valuation.

Schlumberger (SLB) was also a detractor during the quarter with shares declining 9%.
Schlumberger is engaged in energy exploration and production, as well as supplying
technology solutions to improve well utilization rates and reduce carbon emissions.
Guidance for organic revenue growth of just 3% for the fourth quarter was a modest
disappointment for investors, but the bigger culprit was oil prices. WTI crude declined
roughly 20% during the quarter to around $72 barrel as global economies are slowing,
the war in Gaza has not spread beyond that region, and U.S. oil production is projected
to hit a record high in 2024. In spite of the weakness during the period we continue to
maintain our position to the company.

OUTLOOK

(As of 12/31/23)

The economy is slowing to a more sustainable level of growth as consumers have
spent much of the excess savings accumulated during the pandemic. With demand
moderating and the job market beginning to loosen, we believe inflationary pressures
will continue to moderate. The Fed’s aggressive tightening cycle appears to be getting
the job done on inflation, and a disaster scenario of stubbornly high inflation coupled
with a consumer-led recession appears to be off the table. Moreover, the Fed now has
firepower to stimulate when needed.

While the market has moved sharply higher, certain parts of the economy remain
weak. Businesses that pulled forward a lot of demand during the years of COVID and
0% interest rates have been experiencing softening demand for more than a year now.
Consumer categories like home furnishings, leisure goods, and consumer electronics
have given back the bulk of their COVID gains over the past two years. Existing
home sales are at a ten-year low. Businesses that stockpiled inventory during the
supply chain crisis are now cutting orders, and sales cycles for enterprise technology
spending have lengthened as CFO’s look to conserve cash.

Following the sharp rally to close out 2023, the market seems likely to consolidate its
gains in the near term. Numerous forward-looking indicators suggest the economy will
soften in 2024, including an inverted Treasury yield curve, a decline in the Conference
Board Leading Economic Index, and the National Federation of Independent
Businesses’ (NFIB) hiring plans survey. And while the Fed can cut short-term interest
rates to stimulate demand, we do not expect another round of stimulus checks given
the Federal government is already running an unsustainable $2 trillion annual deficit.
Against this backdrop, expect management teams to offer cautious forward-looking
guidance.

We do not have a rising economic tide to lift all boats, but we are still finding highquality companies benefiting from disruptive innovation and secular tailwinds.
Innovative growth businesses with strong balance sheets, scalable business
models, and wide competitive moats – whether they manufacture medical devices,
cybersecurity software, or innovative consumer products – are likely to outperform in a
slower growth environment. This long-term, risk-aware view has served us well and we
believe it will lead to a continued compounding of attractive returns over time. Thank
you for your continued trust and 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 $1.76 Billion  (12/31/21)
Expense Ratio 1.01% / 0.86%
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

Buffalo Discovery Fund
Documents
Last
Updated
  Fact Sheet12/31/23
  Quarterly Commentary12/31/23
  Full Fund Holdings6/30/23
  Prospectus7/28/23
  Statement of Additional Information7/28/23
  Annual Report3/31/23
  Semi-Annual Report9/30/22
  Tax Guide - 20231/8/24
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.

Morningstar Rating™

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 Morningstar Rating does not include any adjustment for sales loads. 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.

©2022 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 Buffalo Discovery Fund (BUFTX) received 3 stars among 523 for the 3-year, 3 stars among 493 for the 5-year, and 3 stars among 395 Mid-Cap Growth funds for the 10-year period ending 2/29/24. Other share classes may have different performance characteristics.

Dividend Focus Fund

Dividend Focus Fund

Quick Facts
Investor Institutional
Ticker: BUFDX BUIDX
Daily Pricing:  
As of 3/28/2024  
NAV: $30.04 $30.04
$ Change: $0.07 $0.06
% Change:
0.23% 0.20%
YTD:
9.92% 9.96%
Inception Date: 12/3/2012 7/1/2019
Expense Ratio: 0.95% 0.80%
Total Net Assets: $121.37 Million  (9/30/23)
Morningstar Category: Large Cap Blend
Benchmark Index: Russell 1000
Dividend Distribution: Quarterly
Related Material:
   Fund Fact Sheet Q4 2023
   PM Commentary Q4 2023
   Portfolio Manager Q&A
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.

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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

CFRA Research and Dividend.com recently hosted a webinar with the topic “Dividend Funds: Do we even need bonds?“. Buffalo Dividend Focus Fund co-portfolio manager Jeff Deardorff, CFA, was a featured presenter on the panel.

To learn more about what was discussed during the webinar and to access a free replay, click here.

Morningstar Rating

     

Overall Morningstar Rating™ of BUFDX based on risk-adjusted returns among 1,298 Large Blend funds as of 2/29/24.

Performance (%)

As of 2/29/243 MOYTD1 YR3 YR5 YR10 YRSince Inception
BUFFALO DIVIDEND FOCUS FUND - Investor10.275.5124.3410.9613.7312.0712.93
BUFFALO DIVIDEND FOCUS FUND - Institutional10.265.5524.4811.1313.9012.2413.10
  Russell 1000 Index12.156.8729.8110.6614.4312.3914.11
  S&P 500 Index11.987.1130.4511.9114.7612.7014.27
As of 12/31/233 MOYTD1 YR3 YR5 YR10 YRSince Inception
BUFFALO DIVIDEND FOCUS FUND - Investor11.1420.0620.069.8414.5611.6012.59
BUFFALO DIVIDEND FOCUS FUND - Institutional11.1320.2120.2110.0014.7311.7712.76
  Russell 1000 Index11.9626.5326.538.9715.5211.8013.65
  S&P 500 Index11.6926.2926.2910.0015.6912.0313.79

2013201420152016201720182019202020212022
BUFFALO DIVIDEND FOCUS FUND - Investor23.9320.810.1312.0618.02-5.0527.6616.6420.97-8.75
BUFFALO DIVIDEND FOCUS FUND - Institutional24.1220.980.2812.2318.20-4.9127.8516.8321.15-8.62
  Russell 1000 Index33.1113.240.9212.0521.69-4.7831.4320.9626.45-19.13
  Morningstar U.S. Large-Mid Cap Index33.2013.320.9211.5921.71-4.5231.6121.1126.44-19.50
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 Russell 1000 Index (As of 12/31/23)
Upside Capture77.51
Downside Capture79.95
Alpha2.41
Beta0.80
Sharpe Ratio0.53
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
2024 Projected Distribution Dates:

Record 6/17/2024 Payable 6/18/2024

Record 9/17/2024 Payable 9/18/2024

Record 12/4/2024 Payable 12/5/2024 Cap Gains (if any)

Record 12/17/2024 Payable 12/18/2024

Record
Date
Payable
Date
Distribution
NAV
Net Investment
Income
Short-Term Capital
Gains
Long-Term Capital
Gains
Distribution
Total
3/18/243/19/24$29.50 (Inv)

$29.51 (Inst)
$0.05519288

$0.06513191
-

-
$0.05519288

$0.06513191
12/18/2312/19/23$27.20 (Inv)

$27.20 (Inst)
$0.15591721

$0.16483955
-

-
$0.15591721

$0.16483955
12/4/2312/5/23$26.40 (Inv)

$26.41 (Inst)
-

-
-

-
0.12045

0.12045
$0.12045

$0.12045
9/18/239/19/23$25.69 (Inv)

$25.70 (Inst)
$0.05988226

$0.06325017
-

-
-

-
$0.05988226

$0.06325017
6/20/236/21/23$24.99 (Inv)

$24.99 (Inst)
$0.13682440

$0.14679972
-

-
-

-
$0.13682440

$0.14679972
3/21/233/20/23$23.12 (Inv)

$23.12 (Inst)
$0.05969832

$0.06839440
-

-
-

-
$0.05969832

$0.06839440
12/19/2212/20/22$23.08 (Inv)

$23.08 (Inst)
$0.05908577

$0.06777300
-

-
-

-
$0.05908577

$0.06777300
12/4/2212/5/22$23.89 (Inv)

$23.90 (Inst)
-

-
-

-
$0.38214

$0.38214
$0.38214

$0.38214
9/19/229/20/22$23.27 (Inv)

$23.27 (Inst)
$0.05162443

$0.06073302
-

-
-

-
$0.05162443

$0.06073302
6/20/226/21/22$22.72 (Inv)

$22.72 (Inst)
$0.06141577

$0.06934834
-

-
-

-
$0.06141577

$0.06934834
3/19/223/18/22$25.56 (Inv)

$25.56 (Inst)
$0.05379801

$0.06334236
-

-
-

-
$0.05379801

$0.06334236
12/19/2112/20/21$25.24 (Inv)

$25.24 (Inst)
$0.02757485

$0.03722365
-

-
-

-
$0.02757485

$0.03722365
12/3/21$24.99 (Inv)

$24.99 (Inst)
-

-
$0.10327

$0.10327
$0.20964

$0.20964
$0.31291

$0.31291
9/20/21$24.79 (Inv)

$24.79 (Inst)
$0.03057741

$0.04007525
-

-
-

-
$0.03057741

$0.04007525
6/18/21$24.27 (Inv)

$24.26 (Inst)
$0.02933960

$0.03839857
-

-
-

-
$0.02933960

$0.03839857
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 12/31/23) 
 
# of Holdings91
Median Market Cap$61.08 B
Weighted Average Market Cap$488.48 B
3-Yr Annualized Turnover Ratio4.65%
% of Holdings with Free Cash Flow66.67%
30-day SEC Yield1.60%
Top 10 Holdings
HoldingTicker / MaturitySector% of Net
Assets
Microsoft CorporationMSFTInformation Technology4.92
Apple Inc.AAPLInformation Technology4.20
Meta Platforms Inc. Class AMETACommunication Services3.31
Viper Energy, Inc.VNOMEnergy3.30
Visa Inc. Class AVFinancials2.36
S&P Global, Inc.SPGIFinancials2.21
UnitedHealth Group IncorporatedUNHHealth Care2.07
Burford Capital LimitedBURFinancials1.98
Royal Caribbean Group 6.0% 15-aug-2025Consumer Discretionary1.88
Arthur J. Gallagher & Co.AJGFinancials1.83
TOP 10 HOLDINGS TOTAL28.07%
As of 12/31/23. 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 12/31/23. 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 12/31/23. Market Cap percentages may not equal 100% due to rounding.

Management

Paul Dlugosch, CFA
Portfolio Manager

26 Years of Experience

 View full bio

Jeff Sitzmann, CFA
Portfolio Manager

36 Years of Experience

 View full bio

Jeff Deardorff, CFA
Portfolio Manager

26 Years of Experience

 View full bio

Commentary

PERFORMANCE COMMENTARY

(As of 12/31/23)

The Buffalo Dividend Focus Fund posted a return of 11.14% for the quarter, a result
that underperformed the Russell 1000 Index return of 11.96%. All sectors of the
portfolio made a positive absolute contribution to the fund’s performance, however
sector weightings and security selection compared to the benchmark contributed
to relative underperformance. Exposure to Consumer Staples, Energy, Financials,
Health Care, Materials, Real Estate and Utilities delivered constructive performance
for the quarter, but was offset by Communication Services, Consumer Discretionary,
Industrials, and Information Technology detracted from the relative performance.

Top Contributors
Specific securities that contributed most positively to performance include Microsoft
Corporation (MSFT), Meta Platforms (META), and Apple Inc. (AAPL). Microsoft
advanced on quarterly results that showed strong positioning in cloud and artificial
intelligence (AI) services as well as expanding margins. Meta delivered healthy quarterly
earnings and a favorable cost outlook for AI. While Apple rose as investors overlooked
weak sales in China and instead focused on interest rate cuts with the prospect of a soft
landing for the U.S. economy.

Top Detractors
To the downside, Northern Oil and Gas (NOG), Hess Corp. (HES) and Valero Energy
(VLO) were among the large detractors to fund performance during the period. The
price of oil dropped from $90 per barrel to around $70 which caused the stock price of
energy companies to fall, as their near-term profits are likely to contract.

OUTLOOK

(As of 12/31/23)

Despite the uncertainty created by interest rate policies, domestic politics, and
geo-political tensions, among other things, 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 dividend-paying companies
that can be purchased at a fair value. 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

Buffalo Dividend Focus Fund
Documents
Last
Updated
  Fact Sheet12/31/23
  Quarterly Q&A12/31/23
  Full Fund Holdings6/30/23
  Prospectus7/28/23
  Statement of Additional Information7/28/23
  Annual Report3/31/23
  Semi-Annual Report9/30/22
  Tax Guide - 20231/8/24
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 4 stars among 1,298 for the 3-year period, 4 stars among 1,183 for the 5-year period, and 4 stars among 891 Large Blend funds for the 10-year period ending 2/29/24.

International Fund

International Fund

Quick Facts
Investor Institutional
Ticker: BUFIX BUIIX
Daily Pricing:  
As of 3/28/2024  
NAV: $22.31 $22.33
$ Change: $-0.06 $-0.06
% Change:
-0.27% -0.27%
YTD:
5.43% 5.48%
Inception Date: 9/28/2007 7/1/2019
Expense Ratio: 1.04% 0.89%
Total Net Assets: $748.45 Million  (9/30/23)
Morningstar Category: Foreign Large Cap Growth
Benchmark Index: FTSE All World Ex-US
Related Material:
   Fund Fact Sheet Q4 2023
   PM Commentary Q4 2023
   Portfolio Manager Q&A
Fund Objective & Investment Philosophy

The investment objective of the Buffalo International Fund is long-term growth of capital. The International Fund invests primarily in equity securities of established companies that are economically tied to various countries throughout the world (excluding the U.S.).

For purposes of the International Fund’s investments, “foreign securities” means those securities issued by companies:

  • Organized under the laws of, or with a principal office in, a country other than the U.S. and issue securities for which the principal trading market is in a country other than the U.S.; or
  • That derive at least 50% of their revenues or profits from goods produced or sold, investments made, or services provided in a country other than the U.S., or have at least 50% of their assets in a country other than the U.S.
  • Under normal circumstances, the International Fund does not expect its investments in emerging markets to exceed 35% of its net assets.

In selecting securities for the International Fund, the Fund managers use a bottom-up approach in choosing investments, seeking companies expected to experience growth based on the identification of long-term, measurable industry, technological, global or other trends. 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.

In making portfolio selections the Fund managers will also consider the economic, political and market conditions of the various countries in which the Fund may invest.

Morningstar Ratings

     

Overall Morningstar Rating™ of BUFIX based on risk-adjusted returns among 391 Foreign Large Growth funds as of 2/29/24

PM Insights


International Equities
— The New Market Leaders?

Access Report >>


The Case for Investing Internationally

Access Report >>

|

When it comes to investing internationally, we believe our approach to stock selection is distinct. We are focused on finding good companies and aren’t constrained by benchmark alignment to countries or industries.

Our approach is based on finding companies with sound business models, exposure to long-term secular growth trends, and attractive risk/return growth and valuation characteristics, which we can own for the long-term.

Nicole Kornitzer, Portfolio Manager

Performance (%)

As of 2/29/243 MOYTD1 YR3 YR5 YR10 YRSince Inception
BUFFALO INTERNATIONAL FUND - Investor8.403.1713.433.929.437.365.69
BUFFALO INTERNATIONAL FUND - Institutional8.473.2113.634.099.607.525.84
  FTSE All World Ex-US Index6.641.4913.272.046.224.683.03
  Lipper International Fund Index7.762.5014.333.047.074.723.15
As of 12/31/233 MOYTD1 YR3 YR5 YR10 YRSince Inception
BUFFALO INTERNATIONAL FUND - Investor11.1618.3318.333.0410.777.065.54
BUFFALO INTERNATIONAL FUND - Institutional11.1818.4718.473.2010.947.225.70
  FTSE All World Ex-US Index9.7616.2016.202.307.854.552.97
  Lipper International Fund Index10.4317.5317.532.738.564.563.03

2013201420152016201720182019202020212022
BUFFALO INTERNATIONAL FUND - Investor19.29-2.04-0.453.1929.33-8.8528.0219.1018.21-21.79
BUFFALO INTERNATIONAL FUND - Institutional19.46-1.89-0.303.3429.53-8.7128.2019.2418.42-21.65
  FTSE All World Ex-US Index15.62-3.04-4.465.1227.47-13.8722.2011.528.66-15.22
  Morningstar Global Markets ex-US Index15.71-3.62-3.655.4527.37-14.1721.5711.178.41-16.15
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
BUFIX vs FTSE All World Ex-US Index (As of 12/31/23)
Upside Capture122.90
Downside Capture109.49
Alpha0.90
Beta1.10
Sharpe Ratio0.04
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 12/31/23) 
 
# of Holdings81
Median Market Cap$45.46 B
Weighted Average Market Cap$91.45 B
3-Yr Annualized Turnover Ratio8.04%
Active Share89.31%
Market Capitalization

As of 12/31/23. Market Cap percentages may not equal 100% due to rounding.

Top 10 Holdings
Name of HoldingTickerCountrySector% of Net
Assets
Linde plcLINSwMaterials2.07
Schneider Electric SESU FPFranceIndustrials2.02
Renesas Electronics Corporation6723 JPJapanInformation Technology1.93
Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADRTSMTaiwanInformation Technology1.76
Novo Nordisk A/S Sponsored ADR Class BNVODenmarkHealth Care1.70
BayCurrent Consulting, Inc.6532 JPJapanIndustrials1.65
MercadoLibre, Inc.MELIArgentinaConsumer Discretionary1.64
Siemens AktiengesellschaftSIE GRGermanyIndustrials1.64
Ashtead Group plcAHT LNUnited KingdomFinancials1.59
GFL EnvisonmentalGFLCanadaIndustrials1.59
TOP 10 HOLDINGS TOTAL17.59%
As of 12/31/23. 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 12/31/23. 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.

Countries
TOP 10 COUNTRIES% of Portfolio
Net Assets
France18.07%
Germany13.96%
Switzerland11.69%
Japan11.43%
United Kingdom11.24%
Ireland7.87%
Canada5.90%
Netherlands4.07%
Sweden2.55%
Denmark2.31%
TOP 10 TOTAL89.10%
As of 12/31/23
MARKET CLASSIFICATION
Emerging Markets:7.23%
Developed Markets:92.77%
As of 12/31/23

Management

Nicole Kornitzer, CFA
Portfolio Manager

23 Years of Experience

 View full bio

Pat Srinivas
International Equity Research Analyst

17 Years of Experience

 View full bio

Frank Deibold
Research Analyst

12 Years of Experience

 View full bio

Commentary

PERFORMANCE COMMENTARY

(As of 12/31/23)

The Buffalo International Fund posted a return of 11.16% for the quarter, outperforming the
broad prospectus index, FTSE All-World ex-US index, which posted a return of 9.75%. The
Buffalo International Fund’s outperformance was mostly due to stock selection, which was
partially offset by a cash position that weighed on performance during the market rally.

Top Contributors

Top contributors in the period included Shin-Etsu Chemical Company, Adyen NV,
and IMCD N.V. Shin-Etsu is a Japanese chemical company that manufactures PVC for
construction and silicon wafers for semiconductors. Management’s positive comments
about both PVC pricing and silicon wafer demand supported the company’s share price
during the quarter. The company should benefit from increasing demand for large silicon
wafers, partially due to generative AI, and supply constraints in the industry. Adyen, a
global payment solutions provider headquartered in the Netherlands, reassured investors
after reporting disappointing results in the prior quarter. The company reported growth that rebounded from the prior period, issued more appropriate mid-term guidance, and responded to several investor concerns. We believe Adyen has the most compelling payment solutions platform for global companies. Finally, IMCD, a specialty chemical distributor, saw its stock rise after a third quarter report delivering better margins than expected. Previous quarters had been challenged due to customer destocking, but management commentary and similar statements from peers seemed to suggest a potential bottom in the industry.

Top Detractors

Top detractors in the quarter were Li Ning, Julius Baer Gruppe AG, and Aon Plc. Li Ning, one of the largest sportswear brands in China, reported disappointing third-quarter results, partially due to a clamp-down on cross-selling among distributors, but also due to the weak consumer sentiment in China and heightened competition among brands in a promotional environment. We remain on the sidelines in terms of an investment with the company given the difficult backdrop, despite favorable long-term trends that should underpin sales of sporting goods in China. Second, Julius Baer, the third-largest private bank in Switzerland, revealed that it had financed the now troubled real estate developer, Ren Benko, up to $500 million in Swiss Francs and has taken a write-down of $82 million Swiss Francs thus
far. The stock price dropped on fear that the write-downs will increase. We continue to hold Julius Baer with the expectation that the stock should recover once it becomes clear that this situation is a one-off event and that the associated risk is manageable. Management does not have a history of poor risk making decisions and the balance sheet is strong enough to absorb further potential write-offs. Over the medium-term the company should benefit from trends in increased wealth and demand for global wealth managers. Finally, Aon, a global reinsurance broker, announced the acquisition of NFP, a middle market insurance broker, for what appears to be a high valuation. The company will take a near-term hit to earnings and cash flows, as the deal will be accretive starting only in 2027. While we think the company
has some work to do in terms of proving the value creation potential of the deal, we give management the benefit of the doubt given their track record in creating value for shareholders. Over the long term the acquisition should boost free cash flow to this historically strong generator of free cash. Aon’s business model remains attractive, and we remain optimistic about the company’s ability to bring value through its data analytics when competing in the middle-market segment.

OUTLOOK

(As of 12/31/23)

We are cautiously optimistic about the prospects for international equity markets in 2024. While we could witness slower global economic growth, inflation should continue to recede, and we expect interest rates to decline in much of the world sometime during the year (perhaps not as quickly as markets might hope). If the United States avoids a recession it should help to prop up the global economy. Across the Atlantic, European economies are clearly weakening, data suggests waning consumer and business confidence, but the continent might be able to avoid a deep recession, given strength in the labor market, positive real wage growth, and healthy consumer savings. In Asia, we continue to be optimistic about the future in Japan. An end to deflation and the new focus on corporate governance and corporate value improvements through the Tokyo Stock Exchange’s 2023 policy initiative bode well for positive economic growth and stock performance.

Overall significant risks remain that could weigh on international equity markets. Geopolitical tensions and several political elections around the world are top of mind. Further disruptions to supply chains and additional inflation shocks have been a recent market concern. China is clearly a concerning piece in the global economy, as recent data shows further deflation, steeper declines in the housing market and weaker consumption. Strong government stimulus is necessary to turn things around but is still nowhere to be found. The weakness in China continues to weigh on many of our portfolio companies, though they are adapting to a less optimistic future and expectations are being reset. On balance, while we acknowledge there are still risks to the global outlook, we believe there is potential for greater optimism
later in the year that could overshadow the lingering negatives as interest rates begin to recede.

Whatever the future brings, we will continue to look for opportunities over the short term to invest with a long-term view. We pay attention to the valuation of the companies in our portfolio and will seek out opportunities during periods of market weakness using volatility to buy high quality growth companies at attractive valuations. Our strategy remains unchanged, focus on companies that can benefit from long term secular growth trends and seek quality companies that have sound, sustainable business models, competitive advantages, that generate consistent free cash flow and strong returns on their investments. We especially like proven management teams that are focused on creating value for shareholders. We believe that by continuing our disciplined strategy we should be able to post attractive risk-adjusted returns over the long term.

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.
International Fund News

International Fund

Total Assets $659.78 Million  (12/31/21)
Expense Ratio 1.04% / 0.89%
Benchmark Morningstar Global Markets ex-US

Kiplinger: Top-Performing Mutual Funds

Kiplinger recognized the Buffalo Flexible Income and International Funds as “Top-Performing Mutual Funds” in their recent fund analysis.

Recent Recognition
  • Investor’s Business Daily “Best Mutual Funds List” – April 21, 2022
  • Kiplinger’s “Top Performing Mutual Funds” – April 18, 2022
  • Kiplinger’s “Top Performing Mutual Funds” – March 10, 2022
  • Kiplinger’s “Top Performing Mutual Funds” – January 24, 2022
  • Kiplinger’s “Top Performing Mutual Funds” – December 21, 2021
  • Kiplinger’s “Top Performing Mutual Funds” – November 18, 2021
  • Kiplinger’s “Top Performing Mutual Funds” – August 18, 2021
  • Investor’s Business Daily “Best Mutual Funds List” – March 22, 2021
  • Investor’s Business Daily “Best Mutual Funds List” – March 23, 2020
  • Citywire “Top 20 Female Portfolio Managers in the U.S.” – December 20, 2019
  • Kiplinger Top-Performing Mutual Fund (5 Years) – November 15, 2019
  • US News & World Reports – Best Mutual Funds – August 15, 2019
  • Zacks “4 Non-U.S. Mutual Funds to Buy Now” – July 3, 2019
  • Zacks “3 Non-U.S. Mutual Funds Worth Taking a Look” – May 3, 2019
  • Morningstar 5-star Overall Rating – March 31, 2019out of 373 Foreign Large Growth funds*
  • Morningstar 5-star Overall Rating – December 31, 2018out of 364 Foreign Large Growth funds*
  • Zacks “Consider These Non-U.S. Mutual Funds for Excellent Returns” – October 25, 2018
  • Morningstar 5-star Overall Rating – September 30, 2018out of 347 Foreign Large Growth funds*
  • Citywire “Winning Women – Top 20 Female Portfolio Managers in the U.S.” – August 31, 2018
  • Citywire “International Stars to Watch” – August 10, 2018
  • Morningstar 5-star Overall Rating – September 30, 2017out of 325 Foreign Large Growth funds*
  • Zacks “Four #1 Non-U.S. Mutual Funds” – September 22, 2017
  • Citywire “Alpha Female 2017 – The Top Female Fund Managers in 7 Major Markets” – August 8, 2017
  • Zacks “3 Strong Buy Non-U.S. Mutual Funds” – June 7, 2017

*Overall Morningstar Rating derived from a weighted average of the fund’s 3-, 5-, and 10-year risk adjusted return.

Literature

Buffalo International Fund
Documents
Last
Updated
  Fact Sheet12/31/23
  Quarterly Q&A12/31/23
  Full Fund Holdings6/30/23
  Prospectus7/28/23
  Statement of Additional Information7/28/23
  Annual Report3/31/23
  Semi-Annual Report9/30/22
  Tax Guide - 20231/8/24
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.

Morningstar Rating™

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 Morningstar Rating does not include any adjustment for sales loads. 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.

©2022 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 Buffalo International Fund (BUFIX) received 4 stars among 391 for the 3-year, 4 stars among 333 for the 5-year, and 4 stars among 229 Foreign Large Growth funds for the 10-year period ending 2/29/24. Other share classes may have different performance characteristics based on risk-adjusted returns.

Large Cap Fund

Large Cap Fund

Quick Facts
Investor Institutional
Ticker: BUFEX BUIEX
Daily Pricing:  
As of 3/28/2024  
NAV: $48.83 $49.13
$ Change: $-0.08 $-0.08
% Change:
-0.16% -0.16%
YTD:
12.56% 12.61%
Inception Date: 5/19/1995 7/1/2019
Expense Ratio: 0.95% 0.80%
Total Net Assets: $100.33 Million  (9/30/23)
Morningstar Category: Large Cap Growth
Benchmark Index: Russell 1000 Growth
Related Material:
   Fund Fact Sheet Q4 2023
   PM Commentary Q4 2023
Fund Objective & Investment Philosophy

The investment objective of the Buffalo Large Cap Fund is long-term growth of capital. The Fund normally invests in equity securities, consisting of common stocks, preferred stocks, convertible securities, warrants and rights of large capitalization (“large-cap”) companies. The Fund considers a company to be a large-cap company if, at time of purchase by the Fund, it has a market capitalization greater than or equal to the lesser of (1) $10 billion, or (2) the median market capitalization of the Russell 1000 Growth Index. The median market capitalization of the Russell 1000 Growth Index changes due to market conditions and also changes with the composition of the Index.

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, 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.

|

We don’t manage to our benchmark so we don’t have too much concentration in any one single trend. We also manage based on valuation, trimming positions when they approach their potential upside and adding to them as they get closer to the potential downside.

Ken Laudan, Portfolio Manager

Morningstar Ratings

       

Overall Morningstar Rating™ of BUFEX based on risk-adjusted returns among 1,115 Large Growth funds as of 2/29/24.

Performance (%)

As of 2/29/243 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO LARGE CAP FUND - Investor14.4810.5146.6511.5316.1613.9017.1210.2810.70
BUFFALO LARGE CAP FUND - Institutional14.5310.5746.8111.6816.3314.0717.3010.4510.86
  Russell 1000 Growth Index14.349.4945.9312.4918.7715.6618.3811.6510.84
  Lipper Large Cap Growth Fund Index16.0310.8947.659.1316.4213.7016.7610.399.62
As of 12/31/233 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO LARGE CAP FUND - Investor13.5440.3940.398.1116.3512.9615.409.9410.37
BUFFALO LARGE CAP FUND - Institutional13.5540.5240.528.2516.5213.1315.5610.1010.54
  Russell 1000 Growth Index14.1642.6842.688.8619.5014.8616.6811.2910.55
  Lipper Large Cap Growth Fund Index14.2342.0342.035.7116.9412.8915.039.959.28

2013201420152016201720182019202020212022
BUFFALO LARGE CAP FUND - Investor32.7612.767.156.9024.86-1.6331.7728.0826.08-28.61
BUFFALO LARGE CAP FUND - Institutional32.9612.927.317.0625.05-1.4831.9828.2826.27-28.51
  Russell 1000 Growth Index33.4813.055.677.0830.21-1.5136.3938.4927.60-29.14
  Morningstar U.S. Large Growth Index32.4614.387.711.7931.152.9433.8138.8621.47-40.36
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
BUFEX vs Russell 1000 Growth Index (As of 12/31/23)
Upside Capture84.83
Downside Capture92.65
Alpha-0.05
Beta0.91
Sharpe Ratio-0.03
Hypothetical Growth of $10,000
This chart illustrates the performance of a hypothetical $10,000 investment made in the Fund on the Fund’s inception date. Assumes reinvestment of dividends and capital gains. This chart does not imply future performance.

Portfolio

Portfolio Characteristics
(As of 12/31/23) 
 
# of Holdings84
Median Market Cap$105.88 B
Weighted Average Market Cap$952.90 B
3-Yr Annualized Turnover Ratio51.15%
% of Holdings with Free Cash Flow91.67%
Active Share39.42%
Top 10 Holdings
Name of HoldingTickerSector% of Net
Assets
Microsoft CorporationMSFTInformation Technology11.39
Apple Inc.AAPLInformation Technology8.95
Amazon.com, Inc.AMZNConsumer Discretionary5.98
Alphabet Inc. Class AGOOGLCommunication Services5.75
NVIDIA CorporationNVDAInformation Technology4.46
Visa Inc. Class AVFinancials2.60
Meta Platforms Inc Class AMETACommunication Services2.46
Costco Wholesale CorporationCOSTConsumer Staples2.00
Eli Lilly and CompanyLLYHealth Care1.47
UnitedHealth Group IncorporatedUNHHealth Care1.34
TOP 10 HOLDINGS TOTAL46.40%
As of 12/31/23. 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 12/31/23. 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 12/31/23. Market Cap percentages may not equal 100% due to rounding.

Management

Ken Laudan
Portfolio Manager

30 Years of Experience

 View full bio

Commentary

PERFORMANCE COMMENTARY

(As of 12/31/23)

The Buffalo Large Cap Fund produced a return of 13.54% in the quarter versus the
Russell 1000 Growth Index return of 14.16%. As mentioned above, the broad large
cap market S&P 500 Index advanced 11.69%. While the portfolio performed well on an
absolute return basis, the slight benchmark relative underperformance was due to cash
drag during the rapid market advance, a decline in the energy company Schlumberger
(SLB) and from the pharmaceutical company Sanofi (SNY). Shares of Schlumberger
dropped by more than 10%, and shares of Sanofi fell by a little more than 7%.
For calendar year 2023, the Buffalo Large Cap Fund produced a total return of 40.39%
versus the Russell 1000 Growth Index gain of 42.68% and 26.29% for the S&P 500
Index. It’s worth noting once again that the fund remained underweight to many
of the Russell 1000 Growth’s high growth, high volatility constituents such as Tesla,
which advanced about +105% in 2023. The fund also remains capped on individual
position weightings for Apple (AAPL) and Alphabet (GOOGL) owing to SEC requirements
regarding diversified investment funds. Apple finished the year representing 12% of the
Russell 1000 Growth Index weight and Alphabet represented 6.5% of the index weight.
Shares of Alphabet climbed 48% in 2023 and Apple advanced more than 58%.

Top Contributors
Top contributors to fund results for the quarter were Microsoft, Amazon, and Apple.
Microsoft rebounded strongly from relative underperformance in the previous quarter
and posted a return of more than 19%. Share price appreciation was driven by
better-than-expected quarterly results as revenue growth of 12% materially exceeded
expectations of 8%. Furthermore, forward guidance was raised primarily due to Azure
(public cloud) growth that is expected to accelerate sequentially owing to increased
demand from large enterprise customers including some AI related workloads…a
key metric investors are watching as we go forward in 2024. Microsoft remained
well-positioned as one of the top long term generative AI beneficiaries. The company
is now launching their gen AI feature with Office 365 (O365 cloud version) to over 200
million monthly active users at a price point of $30 per user per month. This launch will
be watched with some interest by the investment community to get a sense for what
sort of initial interest will be shown by enterprises engaging with AI tools.

A big driver for shares of Amazon’s stock in the most recent quarter (+19.5%) was
the strong financial performance and margin expansion within the core eCommerce
(internet retail) business for Amazon. Financial performance within eComm had
deteriorated materially over the last three years (post Covid) as the company spent
nearly $100 billion building out its delivery and logistics network to facilitate a broad
next-day/same-day delivery service. The company has finally started to grow into this
massive building and logistics expansion and should continue to show strong sequential
improvement in operating margins that could exceed 11% by 2027, more than double
the pre-Covid operating margins of 5%. Moreover, Amazon possesses one of the
highest earnings per share (EPS) growth rates of all the mega cap companies, nearing
30% a year through 2027.

Shares of Apple gained 12.6% in the fourth quarter and the company remained an
important and large weighting of the Buffalo Large Cap Fund at 9% of total assets.
Notwithstanding the large absolute position in Apple, the portfolio is still well below the
benchmark weighting of 12%. While there remain concerns surrounding iPhone sales in
China, and other markets globally, several investment research reports published in the
fourth quarter speculated that Apple may be a stealth AI beneficiary by enabling AI “at the
edge”. At the edge refers to using AI models to generate content directly on your lap top
computer or iPhone (via high powered processing chips in the devices) avoiding the need
to access the cloud for AI workloads. Think about Apple having an AI specific app store
where one can download powerful new applications that provide potentially more privacy
and security than accessing AI tools and apps via a public cloud vendor such as Amazon
or Microsoft. This AI at the edge epiphany, seemed to generate renewed enthusiasm for
Apple’s shares in the period.

Top Detractors
Top detractors from fund results in the quarter were Schlumberger, Sanofi, and
Aon. Schlumberger declined by more than 10% owing to across-the-board weakness
in commodities and oil specifically. The company is a key beneficiary of increased
exploration and production as the world has had a decade of under-investment in oil
and gas. Moreover, the Russian invasion into Ukraine shifted the focus from energy
transition to energy security…a trend unlikely to reverse over the long term.
We continue to like Schlumberger for three primary reasons:

1. Key products for include drill bits, drilling fluids, well construction equipment, wireline
testing (computer on stick) used for sampling quality of reservoirs or quality of the
wells and a whole array of sub-sea and sub-surface products such as well heads,
fluid injection systems and communication equipment.

2. The company also benefits from its growing technological and cloud-based digital
offerings that energy producers are demanding to help drive increased efficiency
and productivity while providing a more efficient climate impact. Higher margins
(38%) by provided by workflow automation, new decision driven insights from its proprietary data of seismic and geological interpretation of reservoirs, which is a $6 billion business or 21% of total annual revenues.

3. The company has a great balance sheet, industry leading margins (26% EBITDA), a
dominant market position, with a thrust to a greener footprint, which all coalesce to
make Schlumberger an interesting investment opportunity, in our view.

Sanofi (SNY) declined more than 7% owing to increased investment spend in research
and development (R&D) to accelerate their business model transformation to one
focusing more on novel biologic molecules. This increased R&D lowered the projected
earnings growth for 2024. We expect the company’s reset earnings growth rate of 8%
coupled with a dividend yield of nearly 3% to commence in 2025. We continue to like
the company longer term given its’ ongoing shift to more durable and differentiated
biologic compounds such as Beyfortus, a novel vaccine for RSV, and Altuvilo, a new
treatment for hemophilia Factor VIII. We believe that both compounds have multi-billion
drug revenue potential. We also see a growing runway for the company’s leading drug,
Dupixent given positive data for use in COPF, which is a large new market opportunity
for this best-in-class franchise.

Finally, shares of Aon pulled back by 10% in the period despite quarterly revenue
and EPS exceeding expectations with no change in the guidance parameters. There
were, however, some mixed results below the headline numbers such as slower than
expected growth within the key commercial risk segment that came in 100 basis points
below the 5% growth expectation, well below what peers are generating. The company
also announced a large acquisition of NFP, a privately held but leading middle market
property and casualty insurance broker. The middle market is where AON had a
product offering gap and NFP should help close that. NFP does provide some potential
integration and execution risk and the transaction will not be accretive until 2027,
so the acquisition represents a bit of balanced risk/reward for AON. Consequently,
we continued to reduce our investment weight in the company despite believing it is
attractively positioned longer term.

OUTLOOK

(As of 12/31/23)

As always, our goal in managing the fund is to produce better than benchmark riskadjusted returns while also generating more consistent, less volatile returns over the
long term. We appreciate your continued confidence in our investment strategy and
approach. It’s one that has historically demonstrated an attractive track record of growth
through various market challenges and opportunities.

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

Buffalo Large Cap Fund
Documents
Last
Updated
  Fact Sheet12/31/23
  Quarterly Commentary12/31/23
  Full Fund Holdings6/30/23
  Prospectus7/28/23
  Statement of Additional Information7/28/23
  Annual Report3/31/23
  Semi-Annual Report9/30/22
  Tax Guide - 20231/8/24
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.

Morningstar Rating™

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 Morningstar Rating does not include any adjustment for sales loads. 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.

©2022 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 Buffalo Large Cap Fund received 4 stars among 1,115 for the 3-year, 4 stars among 1,040 for the 5-year, and 4 stars among 811 Large Growth funds for the 10-year period ending 2/29/24. Other share classes may have different performance characteristics.