Dividend Focus Fund
Quick Facts
| Investor | Institutional | |
| Ticker: | BUFDX | BUIDX |
| Daily Pricing: | ||
| As of 2/7/2023 | ||
| NAV: | $24.79 | $24.79 |
| $ Change: | $0.30 | $0.29 |
| % Change: |
1.22% | 1.18% |
| YTD: |
6.49% | 6.49% |
| Inception Date: | 12/3/2012 | 7/1/2019 |
| Expense Ratio: | 0.93% | 0.78% |
| Total Net Assets: | $113.63 Million (12/31/22) | |
| Morningstar Category: | Large Cap Blend | |
| Benchmark Index: | Russell 1000 | |
| Dividend Distribution: | Quarterly | |
|
Related Material: Fund Fact Sheet Q4 2022 PM Commentary Q4 2022 Summary Prospectus |
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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.
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 1,223 Large Blend funds as of 12/31/22.
Performance (%)
| As of 1/31/23 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | Since Inception |
|---|---|---|---|---|---|---|---|
| BUFFALO DIVIDEND FOCUS FUND - Investor | 6.28 | 5.41 | -2.05 | 10.70 | 9.35 | 12.40 | 12.35 |
| BUFFALO DIVIDEND FOCUS FUND - Institutional | 6.27 | 5.41 | -1.95 | 10.87 | 9.51 | 12.57 | 12.52 |
| Russell 1000 Index | 5.94 | 6.70 | -8.55 | 9.66 | 9.38 | 12.51 | 13.05 |
| Morningstar U.S. Large-Mid Cap Index | 5.85 | 6.57 | -8.95 | 9.44 | 9.34 | 12.48 | 13.01 |
| S&P 500 Index | 5.76 | 6.28 | -8.22 | 9.88 | 9.54 | 12.68 | 13.18 |
| Morningstar Large Blend Category | 6.28 | 6.03 | -7.00 | 9.18 | 8.42 | 11.41 | 11.16 |
| As of 12/31/22 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | Since Inception |
|---|---|---|---|---|---|---|---|
| BUFFALO DIVIDEND FOCUS FUND - Investor | 8.63 | -8.75 | -8.75 | 8.79 | 9.31 | 11.96 | 11.87 |
| BUFFALO DIVIDEND FOCUS FUND - Institutional | 8.67 | -8.62 | -8.62 | 8.96 | 9.48 | 12.13 | 12.04 |
| Russell 1000 Index | 7.24 | -19.13 | -19.13 | 7.35 | 9.13 | 12.37 | 12.44 |
| Morningstar U.S. Large-Mid Cap Index | 7.21 | -19.50 | -19.50 | 7.22 | 9.15 | 12.35 | 12.42 |
| S&P 500 Index | 7.56 | -18.11 | -18.11 | 7.66 | 9.42 | 12.56 | 12.62 |
| Morningstar Large Blend Category | 8.27 | -16.96 | -16.96 | 6.88 | 8.26 | 11.31 | 10.63 |
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|---|---|---|---|---|
| BUFFALO DIVIDEND FOCUS FUND - Investor | 23.93 | 20.81 | 0.13 | 12.06 | 18.02 | -5.05 | 27.66 | 16.64 | 20.97 | -8.75 |
| BUFFALO DIVIDEND FOCUS FUND - Institutional | 24.12 | 20.98 | 0.28 | 12.23 | 18.20 | -4.91 | 27.85 | 16.83 | 21.15 | -8.62 |
| Russell 1000 Index | 33.11 | 13.24 | 0.92 | 12.05 | 21.69 | -4.78 | 31.43 | 20.96 | 26.45 | -19.13 |
| Morningstar U.S. Large-Mid Cap Index | 33.20 | 13.32 | 0.92 | 11.59 | 21.71 | -4.52 | 31.61 | 21.11 | 26.44 | -19.50 |
3 Year Risk Metrics
| BUFDX vs Russell 1000 Index (As of 12/31/22) | |
|---|---|
| Upside Capture | 83.01 |
| Downside Capture | 86.76 |
| Alpha | 2.07 |
| Beta | 0.88 |
| Sharpe Ratio | 0.42 |
Hypothetical Growth of $10,000
Distributions
Net Investment Income, if any – Record Date (3/17/23); Payment Date (3/20/23)
Net Investment Income, if any – Record Date (6/20/23); Payment Date (6/21/23)
Net Investment Income, if any – Record Date (9/18/23); Payment Date (9/19/23)
Capital Gains, if any – Record Date (12/4/23); Payment Date (12/5/23)
Net Investment Income, if any – Record Date (12/18/23); Payment Date (12/19/23)
| Payable Date | Distribution NAV | Net Investment Income | Short-Term Capital Gains | Long-Term Capital Gains | Distribution Total |
|---|---|---|---|---|---|
| 12/5/22 | $23.89 (Inv) $23.90 (Inst) | - - | - - | $0.38214 $0.38214 | $0.38214 $0.38214 |
| 9/20/22 | $23.27 (Inv) $23.27 (Inst) | $0.05162443 $0.06073302 | - - | - - | $0.05162443 $0.06073302 |
| 6/21/22 | $22.72 (Inv) $22.72 (Inst) | $0.06141577 $0.06934834 | - - | - - | $0.06141577 $0.06934834 |
| 3/18/22 | $25.56 (Inv) $25.56 (Inst) | $0.05379801 $0.06334236 | - - | - - | $0.05379801 $0.06334236 |
| 12/20/21 | $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 12/31/22) | |
|---|---|
| # of Holdings | 91 |
| Median Market Cap | $57.09 B |
| Weighted Average Market Cap | $297.40 B |
| 3-Yr Annualized Turnover Ratio | 13.72% |
| % of Holdings with Free Cash Flow | 67.90% |
| 30-day SEC Yield | 1.82% |
Top 10 Holdings
| Holding | Ticker / Maturity | Sector | % of Net Assets |
|---|---|---|---|
| Microsoft | MSFT | Technology | 4.13% |
| Viper Energy Partners | VNOM | Energy | 4.09% |
| Apple | AAPL | Technology | 4.09% |
| CVS Health | CVS | Health Care | 2.99% |
| UnitedHealth Group | UNH | Health Care | 2.69% |
| Visa | V | Financial Services | 2.19% |
| S&P Global | SPGI | Financial Services | 2.07% |
| Arthur J Gallagher & Co | AJG | Financial Services | 1.89% |
| Energy Transfer | ET | Energy | 1.71% |
| Northern Oil & Gas | NOG | Energy | 1.65% |
| TOP 10 HOLDINGS TOTAL | 27.50% | ||
Sector Weighting
Market Capitalization
Management
Commentary
CAPITAL MARKET OVERVIEW
(As of 12/31/22) — Capital markets rallied modestly in the 4th quarter as the S&P 500 Index gained 7.56%, the only positive quarter for 2022. Cooler inflation readings, resilient consumer spending, and better-than-expected corporate earnings buoyed markets during the first two months of the 4th quarter before pulling back in December. Much of the focus remains on the path of future interest rates, recession fears, and the economic and market impact those events may generate in 2023.
Despite the 4th quarter advance, the stock market recorded its worst calendar year since 2008, with a decline of -18.11% for the S&P 500 Index, and a loss of -32.54% for the growth-oriented and technology-heavy Nasdaq Composite Index. Large cap technology stocks and the more interest-rate sensitive assets suffered the most, while value stocks outperformed. In the end, nine of the S&P 500 Index’s 11 economic sectors declined. Energy stocks were the bright spot, recording a gain of 65.72% for the sector while Utilities eked out a gain of 1.57% in 2022.
The damage wasn’t isolated to the stock market as the investment-grade bond indices suffered double-digit losses for the year as well. In fact, a traditional balanced investment portfolio of 60% stocks and 40% bonds suffered the 4th worst drawdown in the past 100 years.
Recapping quarterly results, the broad-based Russell 3000 Index advanced 7.18% in the period. Value stocks significantly outperformed growth stocks to close out 2022, as the Russell 3000 Value Index returned 12.18% versus a return of just 2.31% for the Russell 3000 Growth Index. Relative performance was mixed going down in market cap size as small caps advanced less than large caps in the quarter, while mid cap stocks outperformed both large and small caps. Larger cap stocks returned 7.24%, as measured by the Russell 1000 Index, compared to the smaller cap Russell 2000 Index return of 6.23%, while the Russell Midcap Index produced a return of 9.18% in the quarter.
PERFORMANCE COMMENTARY
Top Contributors
Specific securities that contributed most positively to performance included Horizon Therapeutics, Viper Energy Partners, and HCA Healthcare. Horizon, a manufacturer of biopharmaceuticals, climbed on buyout news that the company would be acquired by Amgen for $116.50 per share in cash. Viper Energy, which owns royalty interests in oil and gas properties in North America, gained on favorable quarterly results and a positive production forecast. HCA, the hospital and health care services provider, advanced on expectations for revenue growth and labor costs normalizing toward pre-pandemic growth trends.
Top Detractors
The top detractors from the Fund’s performance during the period were Amazon.com, Apple Inc., and Apellis Pharmaceuticals. Amazon.com., the online retailer and provider of other computing services, fell after reporting weakness in cloud computing services and forecasting slower than expected growth for holiday sales. Shares of Apple declined as production halts related to lockdowns in China due to COVID-19, combined with a weakening demand for certain Apple products. Apellis, the manufacturer and marketer of biopharmaceuticals, slumped as the company disclosed that it will submit additional data to the U.S Food & Drug Administration (FDA) for its eye disease therapy pegcetatcoplan’s new drug application.
OUTLOOK
Literature
| Buffalo Dividend Focus Fund Documents | Last Updated |
|---|---|
| Fact Sheet | 12/31/22 |
| Quarterly Commentary | 12/31/22 |
| Full Fund Holdings | 6/30/22 |
| Summary Prospectus | 7/29/22 |
| Prospectus | 7/29/22 |
| Statement of Additional Information | 7/29/22 |
| Annual Report | 3/31/22 |
| Semi-Annual Report | 9/30/22 |
| Tax Guide - 2022 | 1/8/23 |
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.
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