Dividend Focus Fund
Quick Facts
| Investor | Institutional | |
| Ticker: | BUFDX | BUIDX |
| Daily Pricing: | ||
| As of 6/8/2023 | ||
| NAV: | $24.93 | $24.94 |
| $ Change: | $0.06 | $0.06 |
| % Change: |
0.24% | 0.24% |
| YTD: |
7.36% | 7.45% |
| Inception Date: | 12/3/2012 | 7/1/2019 |
| Expense Ratio: | 0.93% | 0.78% |
| Total Net Assets: | $120.17 Million (3/31/23) | |
| Morningstar Category: | Large Cap Blend | |
| Benchmark Index: | Russell 1000 | |
| Dividend Distribution: | Quarterly | |
|
Related Material: Fund Fact Sheet Q1 2023 PM Commentary Q1 2023 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 1,268 Large Blend funds as of 4/30/23.
Performance (%)
| As of 4/30/23 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | Since Inception |
|---|---|---|---|---|---|---|---|
| BUFFALO DIVIDEND FOCUS FUND - Investor | 1.08 | 6.55 | 4.10 | 15.13 | 10.93 | 11.66 | 12.16 |
| BUFFALO DIVIDEND FOCUS FUND - Institutional | 1.15 | 6.63 | 4.30 | 15.32 | 11.10 | 11.83 | 12.33 |
| Russell 1000 Index | 1.96 | 8.79 | 1.82 | 14.22 | 11.07 | 11.95 | 12.94 |
| Morningstar U.S. Large-Mid Cap Index | 2.22 | 8.94 | 1.78 | 13.94 | 11.09 | 11.94 | 12.93 |
| S&P 500 Index | 2.72 | 9.17 | 2.66 | 14.52 | 11.45 | 12.20 | 13.14 |
| Morningstar Large Blend Category | 0.87 | 6.87 | 1.80 | 13.72 | 9.94 | 10.81 | 11.04 |
| As of 3/31/23 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | Since Inception |
|---|---|---|---|---|---|---|---|
| BUFFALO DIVIDEND FOCUS FUND - Investor | 3.66 | 3.66 | -4.22 | 18.78 | 10.55 | 11.76 | 11.96 |
| BUFFALO DIVIDEND FOCUS FUND - Institutional | 3.70 | 3.70 | -4.04 | 18.95 | 10.72 | 11.92 | 12.13 |
| Russell 1000 Index | 7.46 | 7.46 | -8.39 | 18.55 | 10.87 | 12.01 | 12.91 |
| Morningstar U.S. Large-Mid Cap Index | 7.57 | 7.57 | -8.58 | 18.23 | 10.87 | 12.02 | 12.90 |
| S&P 500 Index | 7.50 | 7.50 | -7.73 | 18.60 | 11.19 | 12.24 | 13.09 |
| Morningstar Large Blend Category | 5.67 | 5.67 | -7.36 | 17.68 | 9.68 | 10.85 | 11.01 |
| 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 3/31/23) | |
|---|---|
| Upside Capture | 80.50 |
| Downside Capture | 81.50 |
| Alpha | 2.78 |
| Beta | 0.84 |
| Sharpe Ratio | 1.07 |
Hypothetical Growth of $10,000
Distributions
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 |
|---|---|---|---|---|---|
| 3/20/23 | $23.12 (Inv) $23.12 (Inst) | $0.05969832 $0.06839440 | - - | - - | $0.05969832 $0.06839440 |
| 12/20/22 | $23.08 (Inv) $23.08 (Inst) | $0.05908577 $0.06777300 | - - | - - | $0.05908577 $0.06777300 |
| 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 3/31/23) | |
|---|---|
| # of Holdings | 91 |
| Median Market Cap | $56.22 B |
| Weighted Average Market Cap | $385.06 B |
| 3-Yr Annualized Turnover Ratio | 8.94% |
| % of Holdings with Free Cash Flow | 67.47% |
| 30-day SEC Yield | 1.52% |
Top 10 Holdings
| Holding | Ticker / Maturity | Sector | % of Net Assets |
|---|---|---|---|
| Viper Energy Partners | VNOM | Energy | 4.18% |
| Microsoft | MSFT | Technology | 3.92% |
| Apple | AAPL | Technology | 3.54% |
| CVS Health | CVS | Health Care | 2.69% |
| UnitedHealth Group | UNH | Health Care | 2.60% |
| Horizon Therapeutics | HZNP | Health Care | 2.46% |
| Visa | V | Financial Services | 2.35% |
| S&P Global | SPGI | Financial Services | 2.10% |
| Arthur J Gallagher & Co | AJG | Financial Services | 1.91% |
| Bank of America | BAC | Financial Services | 1.83% |
| TOP 10 HOLDINGS TOTAL | 27.58% | ||
Sector Weighting
Market Capitalization
Management
Commentary
CAPITAL MARKET OVERVIEW
(As of 3/31/23) — Capital markets moved higher in the first quarter of 2023 as the S&P 500 Index gained 7.50% and the Bloomberg Aggregate Bond Index advanced 3.0%. Big swings in expectations for the Federal Reserve’s monetary policy drove market volatility during the period. Initially investors were concerned with data showing stubbornly high inflation and the prospect of additional interest rate hikes. However, during the final days of the quarter bank failures from Silicon Valley Bank, Signature Bank, and Credit Suisse, dramatically changed market expectations towards monetary policy and the impact that a banking crisis could have on the broader economy. As a result, shorter term Treasury yields fell, and large cap growth stocks rallied in a flight to quality. The view was that growth companies would be the biggest beneficiaries of lower rates, a reversal of the headwinds faced throughout 2022. Technology stocks were by far the leading contributors to broad market performance during the quarter while value stocks and dividend payers lagged. Excluding the technology sector, the S&P 500 Index return would have only been 2.70% during the period.
Recapping quarterly results, the broad-based Russell 3000 Index advanced 7.18%. Growth stocks significantly outperformed value stocks to start out the year, as the Russell 3000 Value Index returned just 0.91% versus a return of 13.85% for the Russell 3000 Growth Index. Relative performance improved going up in market capitalization (size) as large caps advanced more than small caps in the quarter. Larger cap stocks returned 7.46%, as measured by the Russell 1000 Index, compared to the smaller cap Russell 2000 Index return of 2.74%, while the Russell Microcap Index returned -2.83% in the quarter.
PERFORMANCE COMMENTARY
Top Contributors
Specific securities that contributed most positively to performance include Apple (AAPL), Meta Platforms (META), and Microsoft (MSFT). The big tech companies rallied on announced cost cuts, expectations that the Fed is nearing the end of interest rate hikes, and growth opportunities in AI (artificial intelligence).
Top Detractors
CVS Health (CVS), Viper Energy (VNOM), and Enviva (EVA) detracted from the fund’s performance. CVS, health care and retail pharmacy services, fell on prospects for regulatory changes for PBM (pharmacy benefit managers) and healthcare reimbursement reductions. Viper Energy, oil and gas mineral rights, declined as energy pricing softened during the quarter. Enviva, manufacturer of biomass fuel, slumped on soft earnings and an equity raise.
OUTLOOK
Literature
| Buffalo Dividend Focus Fund Documents | Last Updated |
|---|---|
| Fact Sheet | 3/31/23 |
| Quarterly Commentary | 3/31/23 |
| Full Fund Holdings | 12/31/22 |
| Summary Prospectus | 7/29/22 |
| Prospectus | 7/29/22 |
| Statement of Additional Information | 3/8/23 |
| 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.
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.