Quick Facts

(As of 6/30/17)

Ticker
  BUFDX

Inception Date
  December 3, 2012

Total Fund Assets
  $64.6 M

Expense Ratio
  0.98%

Benchmark Index
  S&P 500

MORNINGSTAR RATING

Overall Morningstar™ rating out of 1,223 Large Blend funds as of 6/30/17 (derived from the fund’s three-year risk adjusted return measure).

INVESTMENT STYLE

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.

RISK VS CATEGORY

 

Low High

The Morningstar™ Risk vs Category rating is an assessment of the variations in a fund’s monthly returns, with an emphasis on downside variations, in comparison to the 1,223 funds in the Large Blend category, as of 6/30/17.

Overview

Investment Strategy

The investment objective of the Buffalo Dividend Focus Fund is primarily current income, with long-term growth of capital as a secondary objective. To pursue its investment objective, the Fund invests in dividend-paying equity securities, consisting of domestic common stocks, preferred stocks, and convertible securities. During normal market conditions, at least 80% of the Fund’s assets will be invested in dividend-paying equity securities, companies that declare and pay cash dividends on at least an annual basis.

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

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

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

~ Paul Dlugosch, Portfolio Manager
~ Scott Moore, Portfolio Manager

Performance

(As of 6/30/17)3 MOYTD1 YR3 YRSince Inception
(12/3/12)
Buffalo Dividend Focus Fund1.337.9816.879.2713.94
S&P 500 Index3.099.3417.909.6114.99
Lipper Equity Income Funds Index2.176.2814.436.7812.39
Morningstar Large Blend2.928.6517.177.6012.78
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 6/30/17)3 MOYTD1 YR3 YRSince Inception
(12/3/12)
Buffalo Dividend Focus Fund1.337.9816.879.2713.94
S&P 500 Index3.099.3417.909.6114.99
Lipper Equity Income Funds Index2.176.2814.436.7812.39
Morningstar Large Blend2.928.6517.177.6012.78
Each Morningstar category average represents a universe of funds with similar objectives.
YearBuffalo Dividend FocusS&P 500Morningstar Large Blend Category
201612.0611.9610.37
20150.131.38-1.46
201420.8113.6910.73
201323.9332.3931.32
2012*0.101.391.15
* Partial year. Inception to year-end.
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 6/30/17)

vs S&P 500
Upside Capture94.67
Downside Capture94.70
Alpha0.40
Beta0.92
Standard Deviation9.97
Sharpe Ratio0.91

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.

Growth of $10k

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

(As of 6/30/17)

# of Holdings90
Median Market Cap$85.16 B
Weighted Average Market Cap$166.70 B
3-Yr Annualized Turnover Ratio51.68%
30-day SEC Yield1.34%
% of Holdings with Free Cash Flow68.54%
Active Share53.91%
HoldingTickerSector% of Net Assets
AppleAAPLTechnology3.79%
MicrosoftMSFTTechnology2.78%
JPMorgan ChaseJPMFinancial Services2.07%
American Electric PowerAEPUtilities2.03%
VisaVFinancial Services1.93%
Bank of AmericaBACFinancial Services1.90%
CoreCivicCXWReal Estate1.75%
BB&TBBTFinancial Services1.62%
Berkshire HathawayBRK/BFinancial Services1.57%
BroadcomAVGOTechnology1.52%
TOP 10 HOLDINGS TOTAL20.96%
View Full Holdings

As of 3/31/17. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Those listed are for the previous quarter. Fund holdings are subject to change and are not recommendations to buy or sell any securities.

Buffalo publishes this listing of securities held as of the most recent calendar-quarter end, with a 30 or 60 day lag depending on the portfolio. Buffalo may exclude any portion of holdings from publication when deemed in the best interest of the portfolio.

The portfolio data and its presentation here may differ from the complete schedules of investments in regulatory filings due to differing accounting and reporting requirements.

As of 6/30/17. 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.

As of 6/30/17. Market Cap percentages may not equal 100% due to rounding.

CAPITAL MARKET OVERVIEW

Equity markets got off to a strong start in the first quarter of 2017, thanks to an improving economic outlook. In February, small business optimism, as measured by the National Federation of Independent Businesses, was at its highest level in 12 years. In addition, the University of Michigan’s March consumer confidence survey showed that consumers were more confident in the economy than they have been at any time since 2000. Against this backdrop, growth stocks outperformed value stocks, led by technology, health care, and consumer discretionary companies. The recent strength in infrastructure companies, banks, and high-tax-rate stocks stalled late in the quarter when, following Congress’s failure to agree on a health care reform bill, investors began to question the Trump administration’s ability to enact elements of its pro-growth agenda. Within commodities, the price of West Texas Intermediate (WTI) crude oil fell 6% during the quarter in response to better than expected U.S. oil inventories and production.

The Russell 3000 Index advanced 5.74% in the first quarter and larger cap stocks outperformed smaller cap stocks. The Russell 1000 Index returned 6.03%, followed by the Russell Mid Cap Index return of 5.15%, and the Russell 2000 Index result of 2.47%. The Russell Micro Cap Index advanced just 0.38% in the quarter. The Russell 3000 Growth Index outperformed the Russell 3000 Value Index by 5.64%. Technology was the best performing sector during the quarter while the energy sector was the worst performer, driven by the decline in crude oil.

PERFORMANCE COMMENTARY

The Buffalo Dividend Focus Fund posted a return of 6.56% for the quarter and outperformed the S&P 500 Index return of 6.07%. For the quarter, the Fund’s relative outperformance was driven by the Financials, Real Estate and Energy sectors while the top detracting sector was Information Technology. The top contributors on an individual security standpoint were Apple, Inc., Noble Midstream Partners and CoreCivic while Hess Corp., ExxonMobil Corp. and QUALCOMM, Inc. were the top detractors. Within the Financials sector, the Fund’s relative outperformance during the quarter was driven by stock selection as S&P Global, Inc. gained 22.13% and Visa, Inc. rose 14.14%. S&P Global’s performance was driven by strong fourth quarter earnings as each of its business segments (Ratings, Market Intelligence and Index) reported better than expected revenue results while margins also improved relative to expectations. Visa’s performance also reflected strong fourth quarter earnings driven by the continued shift towards electronic payments as well as the consolidation of Visa Europe.

Information Technology was a drag on relative results during the period due to the sector allocation impact. While the Fund’s holdings performed slightly better than the Index during the quarter the portfolio was underweight the second best performing benchmark sector which detracted from relative results. Taking a closer look at this area we note that most of the underperformance within the Information Technology sector was specific to the Internet Software & Services subsector, which does not consist of many dividend paying companies that meet our investment criteria.

OUTLOOK

We expect the market to experience continued volatility in the coming quarters as the Federal Reserve continues to normalize interest rates along with a focus on the ability of the Trump administration to enact infrastructure spending, deregulation, and corporate tax reform. Prospective tailwinds for the economy include further job growth, wage increases, lower tax rates, and simply more optimism from both businesses and consumers; all of which could lead to higher Gross Domestic Product (GDP) growth. On the other hand, potential headwinds include potential strengthening of the U.S. dollar, further increases in interest rates, and valuation metrics that are above historical market averages leading us to believe that the stock market may have a hard time achieving further multiple expansion.

Despite the expectation of continued volatility we continue to focus on wide moat, large capitalization companies that are trading at reasonable valuations, in our view. As always, the Fund will continue to focus on competitively advantaged companies that can be purchased at a fair price, in our opinion. As the stock market has continued to climb, it is getting harder to find companies that fit our investment criteria, but we continue follow our process of finding new investment ideas and to be ready when market declines provide better 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. Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any security.

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.

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FOR INDIVIDUAL INVESTORS

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 received 4 stars among 1223 Large Blend funds for the three-year period ending 6/30/17.

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.

©2017 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.