Total Assets $361.63 Million (3/31/20)
Expense Ratio 1.06% / 0.91%
Benchmark Morningstar Global Markets ex-US
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 420 Foreign Large Growth funds as of 4/30/20.
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 4/30/20||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||Since Inception|
|BUFFALO INTERNATIONAL FUND - Investor||-11.65||-12.91||-4.30||4.73||4.94||6.20||3.84|
|BUFFALO INTERNATIONAL FUND - Institutional||-11.59||-12.85||-4.14||4.89||5.10||6.36||3.99|
|Morningstar Global Markets ex-US Index||-15.59||-17.89||-11.59||-0.33||0.36||3.38||0.78|
|Lipper International Fund Index||-15.02||-17.36||-10.85||-0.41||0.26||3.75||0.75|
|Morningstar Foreign Large Growth Category||-10.78||-12.21||-3.84||3.62||2.78||5.42||1.68|
|As of 3/31/20||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||Since Inception|
|BUFFALO INTERNATIONAL FUND - Investor||-19.78||-19.78||-7.67||3.05||3.57||5.27||3.18|
|BUFFALO INTERNATIONAL FUND - Institutional||-19.78||-19.78||-7.57||3.19||3.72||5.43||3.33|
|Morningstar Global Markets ex-US Index||-24.01||-24.01||-16.12||-2.16||-0.19||2.52||0.16|
|Lipper International Fund Index||-23.35||-23.35||-14.49||-1.94||-0.54||2.85||0.15|
|Morningstar Foreign Large Growth Category||-19.08||-19.08||-8.32||2.03||1.79||4.46||1.03|
3 Year Risk Metrics
|BUFIX vs Morningstar Global Markets ex-US Index (As of 3/31/20)|
Hypothetical Growth of $10,000
|(As of 3/31/20)|| |
|# of Holdings||85|
|Median Market Cap||$25.23 B|
|Weighted Average Market Cap||$58.76 B|
|3-Yr Annualized Turnover Ratio||13.91%|
Top 10 Holdings
|Name of Holding||Ticker||Country||Sector||% of Net|
|Taiwan Semiconductor||TSM||Taiwan, Province of China||Technology||2.28%|
|Sartorius Stedim Biotech||DIM||France||Health Care||2.24%|
|ICICI Bank||IBN||India||Financial Services||2.02%|
|Carl Zeiss Meditec||AFX||Germany||Health Care||1.93%|
|LVMH Moet Hennessy||MCP||France||Consumer Discretionary||1.90%|
|TOP 10 HOLDINGS TOTAL||20.73%|
Top 10 Countries
|COUNTRY||% of Portfolio|
|Taiwan, Province of China||2.24%|
|TOP 10 TOTAL||76.11%|
CAPITAL MARKET OVERVIEW
(As of 3/31/20) — Global equity markets fell sharply in the first quarter of 2020 in reaction to the global spread of COVID-19. As the case count increased exponentially, the only effective response was for countries to go into lockdown. The economic impact of these actions became clear as the quarter progressed and virtually all asset classes suffered as a result. Within developed international markets, the United Kingdom and Australia were among the biggest decliners while Switzerland held up relatively well. Counterintuitively, China was a relatively strong country performer, posting a relatively modest 10% decline, while Brazil was among the worst losing 50%.
From a sector perspective, Energy and Consumer Discretionary suffered the most as the Saudis and Russians engaged in an oil price war and consumers globally went into quarantine. The Health Care and Real Estate sectors were relative outperformers during the quarter, but still managed to decline in the double digits giving small cap investors very few places to hide.
(As of 3/31/20) — The Buffalo International Fund (BUFIX) declined by 19.78% during the quarter, outperforming the Morningstar Global Markets ex-US Index’s drop of 24.01%.
One of the contributors to our relative outperformance for the period was Sartorius Stedim Biotech, which supplies equipment and disposables for the biological pharmaceutical industry. As you can imagine, with the rush to find prophylactics and treatments for COVID-19, suppliers to this supply chain have been relative beneficiaries. So too with our investment in Lonza Group, which produces media and active ingredients and helps pharmaceutical companies produce their biologic drugs and drug candidates. Interxion Holdings was also among the group of top contributors, as the company provides cloud and internet gateway access and was acquired in the quarter.
Top detractors from portfolio performance included ICICI Bank, CTS Eventim, and Ashtead Group. ICICI Bank provides financial services throughout India, and, as the COVID-19 virus brought many businesses to a standstill, investors worried about deteriorating health in their loan book, as was the case with all financial institutions. CTS Eventim provides tickets for large gatherings like concerts and sporting events. With social distancing and stay-at-home orders, these large gatherings have been completely canceled until further notice. We exited the position during the period, as we try to assess how and when these gatherings might return. Ashtead Group provides rental equipment primarily for construction related activities. The company’s stock was hit unduly due to fears of a complete economic shutdown. We feel Ashtead will come out of a recession better positioned than ever, and companies may increasingly be likely to rent equipment rather than purchase their own as they try to maintain larger cash balances.
(As of 3/31/20) — In Europe, in an eventual post-crisis economic recovery, fiscal deficits and populism may continue to weigh on sentiment, spending, and investment. Emerging signs of stabilizing growth in the continent earlier this year now seem like a distant memory. In Japan, structural reforms have had limited success, and the consumer tax hike in October 2019 contributed to a sharp economic contraction in the 4th quarter. This market period has obviously been extremely volatile and difficult to navigate. As we saw signs of the virus spreading rapidly, we began taking action by trimming positions where valuation was getting full and/or where an eventual recovery may take longer. We initiated new positions in a few stocks we have been watching and waiting for a more attractive entry point, provided the nature of their businesses would still thrive in such an odd economic period.
The markets will have to endure some very terrible economic data for at least several quarters, and most companies have very little visibility into forward business. While we do not want to underestimate the impact of the coronavirus outbreak, history shows that events like this tend to offer opportunities for investors that are long-term oriented. Despite the uptick in market volatility, we will continue to invest in businesses we believe have durable competitive advantages and superior growth profiles trading at attractive valuations. We believe a portfolio of these companies will continue to offer attractive risk-adjusted returns over the long haul.
International Fund News
Total Assets $361.63 Million (3/31/20)
BUFIX and BUFHX were named to the Investor’s Business Daily Best Mutual Funds 2020 list in the International Stock Fund and U.S. Taxable Bond Funds categories, respectively.
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.
List of the “Top 20 Female Portfolio Managers in the U.S.” according to Citywire includes Buffalo Fund manager Nicole Kornitzer, one of only 7 women to be included in consecutive years.
- 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, 2019 – out of 373 Foreign Large Growth funds*
- Morningstar 5-star Overall Rating – December 31, 2018 – out 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, 2018 – out 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, 2017 – out 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
- Citywire Top 20 Female Portfolio Managers in the U.S. – December 7, 2016
*Overall Morningstar Rating derived from a weighted average of the fund’s 3-, 5-, and 10-year risk adjusted return.
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. ©2020 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.