Quick Facts
Ticker:BUFDX
Inception Date:12/3/2012
Total Net Assets:$52.63 Million  (12/31/18)
Expense Ratio:0.95%
Dividend Distribution:Quarterly
Category:Large Cap Blend
Benchmark:Morningstar U.S. Large-Mid Cap
Related Material:
   Fund Fact Sheet Q4 2018
   PM Commentary Q4 2018
   Summary Prospectus
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. 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

Morningstar Rating

       

Overall Morningstar Rating™ based on risk-adjusted returns among 1,214 Large Blend funds as of 1/31/19.

Investment Style

Performance (%)

As of 1/31/193 MOYTD1 YR3 YR5 YRSince Inception
(12/3/12)
BUFFALO DIVIDEND FOCUS FUND-1.326.71-3.7112.0410.6112.00
  Morningstar U.S. Large-Mid Cap Index0.578.30-2.1014.0510.6513.40
  S&P 500 Index0.268.01-2.3114.0210.9613.48
  Morningstar Large Blend Category0.277.99-3.9012.509.1011.42
As of 12/31/183 MOYTD1 YR3 YR5 YRSince Inception
(12/3/12)
BUFFALO DIVIDEND FOCUS FUND-12.77-5.05-5.057.888.7210.99
  Morningstar U.S. Large-Mid Cap Index-13.68-4.52-4.529.058.2012.12
  S&P 500 Index-13.52-4.38-4.389.268.4912.25
  Morningstar Large Blend Category-13.53-6.27-6.277.666.6510.18

* Partial year. Inception to year-end.

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.

As of July 27, 2018 the Morningstar U.S. Large-Mid Cap Index has replaced the S&P 500 Index as the Fund’s primary benchmark. The Advisor believes that the new index is more appropriate given the Fund’s holdings.

3 Year Risk Metrics
vs Morningstar U.S. Large-Mid Cap Index (As of 12/31/18)
Upside Capture88.91
Downside Capture93.78
Alpha-0.24
Beta0.90
Sharpe Ratio0.68
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
Payable
Date
Distribution
NAV
Net Investment
Income
Short-Term Capital
Gains
Long-Term Capital
Gains
Distribution
Total
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
2019 Distribution Dates:

Record Date: March 18 | Payable Date: March 19

Record Date: June 17 | Payable Date: June 18

Record Date: September 17 | Payable Date: September 18

Record Date: December 17 | Payable Date: December 18


Portfolio

Portfolio Characteristics
(As of 12/31/18) 
 
# of Holdings83
Median Market Cap$89.14 B
Weighted Average Market Cap$196.89 B
3-Yr Annualized Turnover Ratio26.94%
30-day SEC Yield1.81%
% of Holdings with Free Cash Flow66.67%
Top 10 Holdings
HoldingTickerSector% of Net
Assets
MicrosoftMSFTTechnology4.07%
AppleAAPLTechnology3.36%
VisaVFinancial Services3.16%
JPMorgan ChaseJPMFinancial Services2.46%
AMC EntertainmentAMCConsumer Discretionary2.17%
Bank of AmericaBACFinancial Services2.11%
Berkshire HathawayBRK/BFinancial Services1.95%
AnthemANTMHealth Care1.91%
BB&TBBTFinancial Services1.84%
UnitedHealth GroupUNHHealth Care1.82%
TOP 10 HOLDINGS TOTAL24.85%
As of 9/30/18. 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 12/31/18. 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 12/31/18. Market Cap percentages may not equal 100% due to rounding.

Management

Paul Dlugosch, CFA
Portfolio Manager

22 Years of Experience

 View full bio

Jeff Sitzmann, CFA
Portfolio Manager

32 Years of Experience

 View full bio

Jeff Deardorff, CFA
Portfolio Manager

21 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 12/31/18) — The 4th quarter of 2018 was a rough period for equity markets, with steep declines dragging full year returns into negative territory. The S&P 500 Index declined -13.52% during the quarter, driven by fears of tightening monetary policy, escalating trade tensions, slowing global economic growth, and margin pressure from higher labor and freight costs. Investors sought safety in government bonds, driving the yield on the 10-year Treasury down from 3.06% at the end of the 3rd quarter to 2.68% at the end of the 4th quarter.

In a reversal of the year-to-date trend, value outperformed growth in the period, as the Russell 3000 Value Index declined -12.24% compared to a -16.33% drop in the Russell 3000 Growth Index. Large companies held up better than smaller companies during the quarter, as the Russell 1000 Index fell -13.82%, the Russell Midcap Index was down -15.37%, and the small cap Russell 2000 Index was down -20.20%. The only sector to post a positive return in the 4th quarter was Utilities. Real Estate, Consumer Staples, and Health Care were down but outperformed the market. Energy was the worst performing sector, driven by steep declines in crude oil. Technology, Industrials, and Consumer Discretionary also underperformed the broad market.

PERFORMANCE COMMENTARY

(As of 12/31/18) — The Buffalo Dividend Focus Fund (BUFDX) posted a return of -12.77% for the quarter, outperforming the Morningstar U.S. Large-Mid Cap Index return of -13.68% and the S&P 500 Index return of -13.52%.

While the Fund’s absolute performance for the period was disappointing, the Fund’s relative performance was aided by sector weightings and security selection. Investments in sectors with our highest weightings, Financials, Health Care, and Information Technology posted favorable returns relative to comparable index sectors. The Fund’s least weighted sectors, Materials, Real Estate, and Utilities (sectors comprising only about 9% of fund assets combined), had returns lower than their corresponding index sectors.

Top Contributors
Specific securities that contributed most positively to performance included Starbucks, CME Group, and Procter & Gamble. Starbucks improved on a strong earnings report with favorable comparable store sales growth. CME Group advanced on rising earnings expectations due to higher contract trading and recent acquisitions. Shares of Procter & Gamble rose on a positive earnings release with healthy organic sales growth.

Top Detractors
Specific securities that detracted from performance included Activision Blizzard, Hess Corporation, and Conagra. Activision Blizzard fell on weak earnings forecast, as a new video game release missed lofty expectations and a new game received poor reviews. Shares of Hess dropped primarily due to falling oil prices during the period, and Conagra declined on a soft earnings release and weak performance of recent acquisitions.

OUTLOOK

(As of 12/31/18) — We expect the market to experience continued volatility in the coming quarters as the Federal Reserve seeks to normalize interest rates. Other concerns include inflation growth acceleration, potential strengthening of the U.S. dollar, increased protectionism efforts from the U.S. Administration, evolving geopolitical risks, and a divided Congress. Valuation metrics, while off recent highs, are still above historical market averages, leading us to believe the stock market may have a difficult time achieving further multiple expansion. On the other hand, prospective tailwinds for the economy include further job growth, wage increases, lower tax rates, robust business and consumer confidence, and lower energy prices, all of which could lead to higher Gross Domestic Product (GDP) growth.

Despite the expectation of continued volatility, we remain focused on wide moat, large-capitalization, dividend- paying companies trading at what we view as reasonable valuations. As always, the Fund will continue to place emphasis on competitively-advantaged companies that can be purchased at a fair value, as determined by our internal analysis. As stock market volatility has continued to climb, we will look for opportunities to find companies that fit our investment criteria. We will continue following 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.

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 received 3 stars among 1214 for the three-year period and 4 stars among 1076 Large Blend funds for the five-year period ending 1/31/19.

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. ©2018 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.