Total Assets $377.09 Million (9/30/19)
Expense Ratio 1.06% / 0.91%
Benchmark Morningstar Global Markets ex-US
International Equity Funds
Fundamental Growth Investors
Portfolio Managers Bill Kornitzer and Nicole Kornitzer discuss how they attempt to find the most appropriate stocks to invest in from the thousands of companies worldwide.
“Unlike many of our peers, we aren’t trying to pick stocks that are going to be the best performers in the next week or the next quarter, but trying to strive for the best long term performance on a risk adjusted basis over time.”
~ Bill Kornitzer, CFA
Overall Morningstar Rating™ of BUFIX based on risk-adjusted returns among 397 Foreign Large Growth funds as of 10/31/19.
Trump Tariffs & the Current State of International Markets
In a recent Q&A, BUFIX portfolio managers provided insightful answers to questions posed regarding the current state of the international markets.
- What’s your take on the current status of the international market in relation to the U.S. cycle?
- What is your opinion on President Trump’s recent announcement regarding tariffs?
Fund Objective & Investment Strategy
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
- 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.
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
|As of 10/31/19||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||Since Inception|
|BUFFALO INTERNATIONAL FUND - Investor||3.55||20.80||13.77||12.10||7.98||8.01||4.69|
|BUFFALO INTERNATIONAL FUND - Institutional||3.62||20.96||13.95||12.27||8.15||8.18||4.85|
|Morningstar Global Markets ex-US Index||3.19||15.40||11.20||8.11||4.52||5.57||2.03|
|Lipper International Fund Index||3.87||16.93||10.85||7.97||4.35||5.81||1.93|
|Morningstar Foreign Large Growth Category||2.96||20.53||14.78||9.61||5.56||6.84||2.35|
|As of 9/30/19||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||Since Inception|
|BUFFALO INTERNATIONAL FUND - Investor||-1.78||16.73||1.24||9.75||7.23||7.62||4.43|
|BUFFALO INTERNATIONAL FUND - Institutional||-1.71||16.89||1.42||9.93||7.39||7.78||4.58|
|Morningstar Global Markets ex-US Index||-1.61||11.34||-1.54||6.26||3.55||5.06||1.74|
|Lipper International Fund Index||-1.28||13.08||-1.80||6.05||3.53||5.17||1.66|
|Morningstar Foreign Large Growth Category||-1.24||16.79||0.61||7.18||4.94||6.29||2.10|
3 Year Risk Metrics
|BUFIX vs Morningstar Global Markets ex-US Index (As of 9/30/19)|
Hypothetical Growth of $10,000
|(As of 9/30/19)|| |
|# of Holdings||87|
|Median Market Cap||$27.35 B|
|Weighted Average Market Cap||$58.93 B|
|3-Yr Annualized Turnover Ratio||17.07%|
Top 10 Holdings
|Name of Holding||Ticker||Country||Sector||% of Net|
|Sartorius Stedim Biotech||DIM||France||Health Care||2.44%|
|Carl Zeiss Meditec||AFX||Germany||Health Care||2.08%|
|LVMH Moet Hennessy||MC||France||Consumer Discretionary||1.98%|
|ICICI Bank||IBN||India||Financial Services||1.84%|
|TOP 10 HOLDINGS TOTAL||21.23%|
Top 10 Countries
|COUNTRY||% of Portfolio|
|TOP 10 TOTAL||78.83%|
CAPITAL MARKET OVERVIEW
(As of 9/30/19) — The Buffalo International Fund produced a return of -1.67% for the quarter and slightly underperformed the Morningstar Global Markets ex-U.S. Index. The Fund’s relative underperformance was primarily related to stock selection. Overall, both sector and country allocation decisions were fairly neutral to our portfolio, while the portfolio’s allocation to cash was a benefit to relative results given declining international markets.
Top contributors in the quarter were Taiwan Semiconductor Manufacturing Company, ASML Holding NV, and Carl Zeiss Meditec AG. Taiwan Semiconductor, widely believed to be the most efficient and technologically-advanced semiconductor manufacturer, saw its stock recover in July after reporting good results and a positive outlook. The shares had declined in May due to trade war related worries. ASML, a supplier of semiconductor manufacturing equipment to Taiwan Semiconductor and others, also saw its stock recover after reporting better-than-expected results in the 2nd quarter despite trade war concerns. Demand for extreme ultraviolet lithography tools is growing as Taiwan Semiconductor is shifting to 7 and 5 nanometer technology. Meanwhile, in the Health Care sector, Carl Zeiss Meditec, a leading global provider of ophthalmic equipment and solutions based in Germany, continued to benefit from demographic trends and strong growth, especially in Asia.
Top detractors during the period included Tomra, SAP, and Kering.
Tomra, a Norwegian manufacturer of systems for the collection and sorting of waste, had disappointing 2nd quarter results, as order intake and backlog declined related to weak demand in the food segment in the U.S., because of the U.S.-China trade conflict. Near term results could be volatile, but we continue to believe that the company’s products will be in increasing demand over the mid-to-long term as the world must invest more in the collecting and recycling of the growing amount of global trash, particularly plastic.
SAP, a German multinational software company and a global leader in enterprise management software, declined after reporting 2nd quarter results in July that missed analyst estimates, with weak sales growth in China and a lack of margin expansion. We continue to believe that SAP is on track to meet its full year guidance and that the long-term trends of moving more and more into the cloud will benefit the company, while a recent stronger focus on profitability will keep management focused on improving margins.
Kering, a French luxury brand conglomerate, saw pressure on its stock price due to investor concerns around slowing growth of the Gucci brand and the potential short-term impact on sales from the political unrest in Hong Kong.
(As of 9/30/19) — We are in a period of uncertainty with respect to global growth. With the trade war still unresolved, and Brexit uncertainty still weighing, industries such as autos are in decline and businesses are holding back investments, while in emerging markets there are some signs that the consumer is beginning to tighten its purse strings. Global growth has been slowing and some economists are warning that a worsening of the tariff conflict could tip the world into a recession. The million-dollar question has now become what will happen in 2020, but the answer is not yet given.
On the other hand, there also are reasons to be optimistic. Global employment is strong, wages have been increasing, and consumer confidence in much of the world has remained resilient. While global trade has been weakening and manufacturing has been in decline, the services sector has remained strong. Finally, global central banks remain accommodative, and China is willing to inject more fiscal stimulus into its economy. Though, as we have written before, we view further loose monetary policies as more a means of pushing up financial asset prices than as major economic stimulus.
Whatever the economic outcome in the next quarter or the next year, we continue to have confidence in our investment process, and it remains steadfast. It is designed to identify companies that can grow throughout the economic cycle, and we believe that stocks outside the U.S. have become even less expensive relative to their domestic counterparts over the last few years. We hope to take advantage of any significant market movements caused by slowing economic growth or trade concerns by adding to our positions in those companies whose long-term prospects remain unchanged, in our view. Ups and downs in the global economy are inevitable. Yet, we believe that by remaining focused on investing in well-managed and innovative companies, which are benefiting from secular growth trends and are trading at attractive valuations, can lead to superior risk-adjusted returns over the long term.
International Fund News
Total Assets $377.09 Million (9/30/19)
Bill Kornitzer, Buffalo International Fund co-portfolio manager, recently appeared on the Money Life with Chuck Jaffe podcast, discussing investing internationally and provided his viewpoints on the current U.S. trade wars, Brexit, and global markets.
Nicole Kornitzer, Buffalo International Fund co-portfolio manager, discusses her team’s approach to finding premier growth companies that are poised to take advantage of global trends.
Nicole Kornitzer (Buffalo International Fund co-PM) described her team’s top-down strategy of studying secular growth trends within the health care industry and identifies 3 companies which are well-positioned to benefit from these long-term trends.
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.
We construct our portfolios based on our own proprietary investment strategy.
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.
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. ©2019 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.