Dividend Focus Fund

Quick Facts
Investor Institutional
Ticker: BUFDX BUIDX
Daily Pricing:  
As of 9/29/2022  
NAV: $22.04 $22.04
$ Change: $-0.36 $-0.36
% Change:
 -1.61% -1.61%
YTD:
 -15.19% -15.09%
Inception Date: 12/3/2012 7/1/2019
Expense Ratio: 0.93% 0.78%
Total Net Assets: $107.55 Million  (6/30/22)
Morningstar Category: Large Cap Blend
Benchmark Index: Russell 1000
Dividend Distribution: Quarterly
Related Material:
   Fund Fact Sheet Q2 2022
   PM Commentary Q2 2022
   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.

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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

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 1,231 Large Blend funds as of 8/31/22.

Performance (%)

As of 8/31/223 MOYTD1 YR3 YR5 YRSince Inception
BUFFALO DIVIDEND FOCUS FUND - Investor-3.71-8.93-5.3312.0310.9712.28
BUFFALO DIVIDEND FOCUS FUND - Institutional-3.63-8.82-5.1812.1911.1412.45
  Russell 1000 Index-3.69-16.90-12.9612.1411.6113.21
  Morningstar U.S. Large-Mid Cap Index-3.71-17.24-13.3412.0111.6113.19
  S&P 500 Index-3.88-16.14-11.2312.3911.8213.35
  Morningstar Large Blend Category-4.20-15.95-12.0810.7710.2711.15
As of 6/30/223 MOYTD1 YR3 YR5 YRSince Inception
BUFFALO DIVIDEND FOCUS FUND - Investor-11.59-12.69-6.4610.8710.2912.02
BUFFALO DIVIDEND FOCUS FUND - Institutional-11.52-12.63-6.2811.0410.4612.19
  Russell 1000 Index-16.67-20.94-13.0410.1711.0012.87
  Morningstar U.S. Large-Mid Cap Index-16.88-21.25-13.2410.0911.0112.85
  S&P 500 Index-16.10-19.96-10.6210.6011.3113.05
  Morningstar Large Blend Category-14.88-19.30-11.589.149.7710.90

 201320142015201620172018201920202021
BUFFALO DIVIDEND FOCUS FUND - Investor23.9320.810.1312.0618.02-5.0527.6616.6420.97
BUFFALO DIVIDEND FOCUS FUND - Institutional24.1220.980.2812.2318.20-4.9127.8516.8321.15
  Russell 1000 Index33.1113.240.9212.0521.69-4.7831.4320.9626.45
  Morningstar U.S. Large-Mid Cap Index33.2013.320.9211.5921.71-4.5231.6121.1126.44
For performance prior to 7/1/19 (Inception Date of Institutional Class), performance of the Investor Class shares is used and includes expenses not applicable and lower than those of Investor Class shares.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.
3 Year Risk Metrics
BUFDX vs Russell 1000 Index (As of 6/30/22)
Upside Capture84.15
Downside Capture85.89
Alpha1.64
Beta0.89
Sharpe Ratio0.60
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
2022 Distribution Dates:

Capital Gains, if any – Record Date (12/2/22); Payment Date (12/5/22)
Net Investment Income, if any – Record Date (12/19/22); Payment Date (12/20/22)
Payable
Date		Distribution
NAV		Net Investment
Income		Short-Term Capital
Gains		Long-Term Capital
Gains		Distribution
Total
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 6/30/22) 
 
# of Holdings88
Median Market Cap$59.51 B
Weighted Average Market Cap$354.57 B
3-Yr Annualized Turnover Ratio17.35%
% of Holdings with Free Cash Flow69.62%
30-day SEC Yield1.42%
Top 10 Holdings
HoldingTicker / MaturitySector% of Net
Assets
MicrosoftMSFTTechnology4.92%
AppleAAPLTechnology4.64%
Viper Energy PartnersVNOMEnergy3.79%
CVS HealthCVSHealth Care2.85%
S&P GlobalSPGIFinancial Services2.50%
VisaVFinancial Services2.45%
UnitedHealth GroupUNHHealth Care2.44%
Horizon TherapeuticsHZNPHealth Care2.22%
Bank of AmericaBACFinancial Services1.97%
Edison IntlEIXUtilities1.83%
TOP 10 HOLDINGS TOTAL29.61%
As of 3/31/22. 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.
View Full Holdings
Sector Weighting
As of 6/30/22. 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 6/30/22. Market Cap percentages may not equal 100% due to rounding.

Management

Paul Dlugosch, CFA
Portfolio Manager

25 Years of Experience

 View full bio

Jeff Sitzmann, CFA
Portfolio Manager

35 Years of Experience

 View full bio

Jeff Deardorff, CFA
Portfolio Manager

25 Years of Experience

 View full bio

Commentary

 Q2 2022 Commentary
CAPITAL MARKET OVERVIEW

(As of 6/30/22) — The stock market extended year-to-date losses during the 2nd quarter. Inflation, rising interest rates, and economic uncertainty continued to be major headwinds for investors as recession talks gained traction. The S&P 500 Index fell -16.10% during the quarter, bringing the total return for the first half of the year to -19.96%. News headlines, which included energy shortages, the war in Ukraine, China’s COVID lockdowns, and the potential for softer corporate earnings next quarter, added to the pessimistic market sentiment. However, the Federal Reserve’s hawkish stance on inflation, expectations for additional interest rate increases, and a reduction in the size of its balance sheet, continued to signal confidence in the U.S. economy moving forward.

The broad-based Russell 3000 Index declined -16.70% in the quarter. Value stocks fell less than growth stocks as the Russell 3000 Value Index returned -12.41%, versus a return of -20.83% for the Russell 3000 Growth Index. Relative performance slightly favored market cap size as large caps outperformed small caps in the quarter. Larger cap stocks, as measured by the Russell 1000 Index, returned -16.67% compared to the smaller cap Russell 2000 Index return of -17.20% and the Russell Microcap Index return of -18.96%. There were no advancing economic sectors for the quarter, but Consumer Staples, Energy, Utilities, and Healthcare held up better on a relative basis. Consumer Discretionary, Information Technology and Communication Services areas lagged.

PERFORMANCE COMMENTARY
(As of 6/30/22) — The Buffalo Dividend Focus Fund (BUFDX) posted a return of -11.52% in the quarter, outperforming the Morningstar U.S. Large-Mid Cap Index return of -16.88% and the Russell 1000 Index return of -16.67%. All sectors across the Fund generated negative absolute returns during the period, however, relative to the benchmark index, the Fund’s exposure to Consumer Discretionary, Industrials, Information Technology, Materials, and Real Estate delivered constructive performance. Consumer Staples, Energy, Financials, Health Care, Telecommunication Services, and Utilities detracted from the relative performance.

Top Contributors

Specific securities that contributed the most to performance included Eli Lilly & Co. (LLY), Lamb Weston Holdings (LW), and Merck & Co. (MRK). Eli Lilly, a manufacturer and marketer of pharmaceutical products, climbed as investors reacted favorable to its robust new product cycle outlook over the next few years across large end markets such as diabetes, obesity, Alzheimer’s, cancer, and immunology. Lamb Weston, a producer of frozen potato products, gained on strong quarterly results with margins expected to rise as price increases are implemented and the potato crop normalizes. Merck, a manufacturer and marketer of pharmaceutical products, advanced on solid quarterly results beating expectations (cancer drugs, anti-viral, and vaccines) while management also raised its financial guidance for the year.

Top Detractors

Apple Inc. (AAPL), Microsoft Corp. (MSFT), and HCA Healthcare Inc. (HCA) detracted from the Fund’s performance in the quarter. Despite reporting record quarterly results, shares of Apple fell as management guided toward the impact of supply chain constraints that would curtail sales in the current quarter. Microsoft declined as currency headwinds resulted in a reduction of management’s guidance for quarterly results. HCA Healthcare, which operates hospitals and provides healthcare services, slumped as quarterly results and outlook were weaker than expected due to higher labor costs and COVID patients needing less intensive services.

OUTLOOK
(As of 6/30/22) — The stock market traded off in the quarter as investors grew increasingly concerned about the economy as inflation rises, Federal Reserve (the “Fed”) policy remains hawkish, geopolitical issues continue to be elevated, and COVID mutates. With inflation accelerating toward the 9% area, the Fed implemented two rate increase during the quarter to curb demand and slow the pace of rising prices. Stocks initially rose on the rate increase announcements only to decline as investors became concerned that the Fed’s action will result in a recession. The Fed has indicated that inflation is its top priority and will raise rates even if it causes an economic slowdown. Stock market performance is likely to reflect how investors view how well the Fed can manage its goal of reducing inflation without tipping the economy into recession. This will not be an easy task. Although layoff announcements have ticked up, healthy employment reports and elevated job openings indicate the economy remains resilient. Investors also may start to look beyond current the round increases and start to price in expectations for when the Fed will shift its policy. Prospects for passage of a scaled down Build Back Better plan (BBB) is another factor that could move markets in the near term.

Despite the uncertainty created by pandemic, Fed policy, and fiscal prospects, we remain focused on wide-moat, large-capitalization companies trading at reasonable valuations, in our view. As always, the Fund will continue to emphasize on competitively advantaged companies that can be purchased at a fair value, in our opinion. As stock market volatility spikes, we will look for opportunities to find companies that fit our investment criteria, as we continue to follow 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.

Literature

General Account
Forms		Investor
Class		Institutional
Class		Both
  New Account Application
  New Account Application - Entity
  Change or Add Account Details
  Cost Basis Method Election
  Power of Attorney
Individual Retirement Account (IRA) Forms
  IRA Account Application
  IRA Beneficiary Addition / Change
  IRA Required Minimum Distribution (RMD)
  IRA / Qualified Plan Distribution Request
  IRA Transfer
Coverdell Education Savings Accounts (ESA) Forms
  Coverdell ESA Application
  Coverdell ESA Distribution Request
  Coverdell ESA Transfer
Retirement Information
  Retirement Savings Options for Individuals

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 (BUFDX) received 4 stars among 1,231 for the 3-year period and 4 stars among 1,111 Large Blend funds for the 5-year period ending 8/31/22.

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. ©2022 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.