Dividend Focus Fund
Quick Facts
| Investor | Institutional | |
| Ticker: | BUFDX | BUIDX |
| Daily Pricing: | ||
| As of 5/24/2022 | ||
| NAV: | $23.84 | $23.85 |
| $ Change: | $-0.09 | $-0.08 |
| % Change: |
-0.38% | -0.33% |
| YTD: |
-8.71% | -8.64% |
| Inception Date: | 12/3/2012 | 7/1/2019 |
| Expense Ratio: | 0.94% | 0.79% |
| Total Net Assets: | $116.83 Million (3/31/22) | |
| Morningstar Category: | Large Cap Blend | |
| Benchmark Index: | Russell 1000 | |
| Dividend Distribution: | Quarterly | |
|
Related Material: Fund Fact Sheet Q1 2022 PM Commentary Q1 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.
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 1,212 Large Blend funds as of 4/30/22.
Performance (%)
| As of 4/30/22 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | Since Inception |
|---|---|---|---|---|---|---|
| BUFFALO DIVIDEND FOCUS FUND - Investor | -4.90 | -6.61 | 1.78 | 13.18 | 11.84 | 13.05 |
| BUFFALO DIVIDEND FOCUS FUND - Institutional | -4.90 | -6.57 | 1.94 | 13.35 | 12.00 | 13.22 |
| Russell 1000 Index | -8.42 | -13.59 | -2.10 | 13.57 | 13.44 | 14.19 |
| Morningstar U.S. Large-Mid Cap Index | -8.56 | -13.84 | -2.07 | 13.55 | 13.49 | 14.18 |
| S&P 500 Index | -8.17 | -12.92 | 0.21 | 13.85 | 13.66 | 14.32 |
| Morningstar Large Blend Category | -7.65 | -12.61 | -1.68 | 12.17 | 11.99 | 12.05 |
| As of 3/31/22 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | Since Inception |
|---|---|---|---|---|---|---|
| BUFFALO DIVIDEND FOCUS FUND - Investor | -1.24 | -1.24 | 13.39 | 17.06 | 13.34 | 13.85 |
| BUFFALO DIVIDEND FOCUS FUND - Institutional | -1.25 | -1.25 | 13.51 | 17.22 | 13.51 | 14.02 |
| Russell 1000 Index | -5.47 | -5.47 | 11.76 | 16.79 | 13.81 | 13.32 |
| Morningstar U.S. Large-Mid Cap Index | -5.27 | -5.27 | 13.47 | 18.76 | 15.90 | 15.48 |
| S&P 500 Index | -4.60 | -4.60 | 15.65 | 18.92 | 15.99 | 15.58 |
| Morningstar Large Blend Category | -5.23 | -5.23 | 12.10 | 16.78 | 14.09 | 13.15 |
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|---|---|
| BUFFALO DIVIDEND FOCUS FUND - Investor | 23.93 | 20.81 | 0.13 | 12.06 | 18.02 | -5.05 | 27.66 | 16.64 | 20.97 |
| BUFFALO DIVIDEND FOCUS FUND - Institutional | 24.12 | 20.98 | 0.28 | 12.23 | 18.20 | -4.91 | 27.85 | 16.83 | 21.15 |
| Russell 1000 Index | 33.11 | 13.24 | 0.92 | 12.05 | 21.69 | -4.78 | 31.43 | 20.96 | 26.45 |
| 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 |
3 Year Risk Metrics
| BUFDX vs Russell 1000 Index (As of 3/31/22) | |
|---|---|
| Upside Capture | 84.13 |
| Downside Capture | 90.26 |
| Alpha | -0.02 |
| Beta | 0.91 |
| Sharpe Ratio | 0.97 |
Hypothetical Growth of $10,000
Distributions
Net Investment Income, if any – Record Date (6/17/22); Payment Date (6/20/22)
Net Investment Income, if any – Record Date (9/19/22); Payment Date (9/20/22)
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 |
|---|---|---|---|---|---|
| 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 3/31/22) | |
|---|---|
| # of Holdings | 88 |
| Median Market Cap | $59.29 B |
| Weighted Average Market Cap | $468.42 B |
| 3-Yr Annualized Turnover Ratio | 18.53% |
| % of Holdings with Free Cash Flow | 70.51% |
| 30-day SEC Yield | 1.06% |
Top 10 Holdings
| Holding | Ticker / Maturity | Sector | % of Net Assets |
|---|---|---|---|
| Microsoft | MSFT | Technology | 5.35% |
| Apple | AAPL | Technology | 4.71% |
| Viper Energy Partners | VNOM | Energy | 3.09% |
| CVS Health | CVS | Health Care | 2.89% |
| UnitedHealth Group | UNH | Health Care | 2.40% |
| Visa | V | Financial Services | 2.39% |
| Horizon Therapeutics | HZNP | Health Care | 2.27% |
| Bank of America | BAC | Financial Services | 2.12% |
| S&P Global | SPGI | Financial Services | 2.07% |
| Elanco Animal Health | ELAT | Health Care | 1.90% |
| TOP 10 HOLDINGS TOTAL | 29.19% | ||
Sector Weighting
Market Capitalization
Management
Commentary
CAPITAL MARKET OVERVIEW
(As of 3/31/22) — The equity market, as measured by the S&P 500 Index, suffered its second quarterly decline since the onset of the COVID-19 pandemic, over two years ago, producing a return of -4.60% during the January–March period. Weak capital market performance can be largely attributed to the Federal Reserve’s decision to raise interest rates and reduce the size of its balance sheet, also known as quantitative tightening. Other headwinds, including the war in Ukraine, significant inflation, and persistent supply chain bottlenecks, only added to the backdrop of uncertainty for domestic and global markets.
The broad-based Russell 3000 Index fell -5.28% in the quarter. Value stocks outperformed growth stocks by a large amount, as the Russell 3000 Value Index returned -0.85% compared to a decline of -9.25% for the Russell 3000 Growth Index. Large cap stocks fell less than smaller cap stocks during the quarter, as the Russell 1000 Index declined -5.13%, followed by a return of -5.68% for the Russell Midcap Index, and -7.53% for the small cap Russell 2000 Index. Energy stocks surged during the period on rising oil prices while the more defensive Utilities and Telecommunication Services sectors were also modestly positive. The Consumer Discretionary and Technology areas of the market were the largest underperformers due to inflation and rising rates.
PERFORMANCE COMMENTARY
(As of 3/31/22) — The Buffalo Dividend Focus Fund (BUFDX) posted a return of -1.24% during the quarter, outperforming the Morningstar U.S. Large-Mid Cap Index return of -5.27% and the Russell 1000 Index return of -4.60%. The portfolio’s Consumer Discretionary, Energy, Health Care, Information Technology, Materials, and Utilities investments contributed to relative performance.
Top Contributors
Specific securities that contributed most positively to performance include Viper Energy Partners LP, Northern Oil and Gas, and Energy Transfer LP. The three companies are involved in the oil and gas industries and benefited from rising commodities prices following increased demand and supply constraints.
Top Detractors
Meanwhile Home Depot, Microsoft Corporation, and Meta Platforms detracted from the Fund’s relative performance. Home Depot fell as rising interest rates and declining gross margins reduced investor sentiment for the company. Microsoft moved lower as rising interest rates have tempered overall valuations for technology companies. Meta Platforms declined on a revenue forecast that was below estimates, combined with stagnating user growth on increasing competition from other social media platforms.
OUTLOOK
(As of 3/31/22) — Measures of inflation have reached levels not seen in decades, as demand has bounced back, while supply chain issues (bottlenecks, chip shortages, lack of workers, etc.) have restrained supplies. Businesses also lost productivity as COVID-19 continued to lead to employee absenteeism. Additionally, inflation and supply chain issues have been impacted by sanctions against Russia following its invasion of Ukraine. As a result, the Federal Reserve (the “Fed”) has adopted a more hawkish approach toward interest rates and a reduction in their balance sheet. As the Fed implements these programs, it will attempt to strike a delicate balance of curbing inflation without causing a recession. Stock market performance is likely to reflect the view of how well the Fed is managing the situation.
Despite the uncertainty, we remain focused on identifying competitively-advantaged, wide-moat companies trading at reasonable valuations. We will be ready to take advantage of opportunities created by stock market volatility using market declines as attractive entry points for long-term investors.
Literature
| Buffalo Dividend Focus Fund Documents | Last Updated |
|---|---|
| Fact Sheet | 3/31/22 |
| Quarterly Commentary | 3/31/22 |
| Full Fund Holdings | 12/31/21 |
| Summary Prospectus | 7/29/21 |
| Prospectus | 7/29/21 |
| Statement of Additional Information | 7/29/21 |
| Annual Report | 3/31/21 |
| Semi-Annual Report | 9/30/21 |
| Tax Guide - 2021 | 1/3/22 |
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.
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. ©2021 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.