Flexible Income Fund
(As of 3/31/17)
August 12th, 1994
Total Fund Assets
Overall Morningstar™ rating out of 345 Allocation–70% to 85% Equity funds as of 4-30-2017 (derived from a weighted average of the fund’s three-, five-, and ten-year risk adjusted return measure, if applicable).
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
The investment objective of the Buffalo Flexible Income Fund is primarily the generation of high current income and, as a secondary objective, the long-term growth of capital.
To pursue its investment objectives, the Flexible Income Fund invests in both debt and equity securities.
Our investment strategy seeks to generate yield for any investor needing monthly income with capital appreciation, and we use many methods to address potential downside risks.
~ John Kornitzer, Portfolio Manager
With respect to debt securities, the Fund managers perform extensive fundamental investment research to identify investment opportunities for the Flexible Income Fund. When evaluating investments and the credit quality of rated and unrated securities, the Fund managers look at a number of past, present and estimated future factors, including financial strength of the issuer, cash flow, management, borrowing requirements, sensitivity to changes in interest rates and business conditions, relative value. The Flexible Income Fund relies on the Fund manager to undertake a careful analysis to determine the creditworthiness of the issuers of rated debt (on debt ratings by Moody’s Investors Service, Inc., (“Moody’s) or S&P Global Ratings, (“S&P”)), as well as the issuers of debt not rated by Moody’s or S&P.
The Fund will not purchase a debt security that is rated less than Caa/CCC by Moody’s or S&P, respectively, and will only purchase an unrated debt security if the Fund managers believe that the security is of at least B quality, subject to a limitation that the Fund may not hold more than 20% of its net assets in debt securities that are rated less than B or that are unrated debt securities of similar quality, based on the Fund managers’ fundamental analysis of the issuer and of rated bonds issued by similar issuers. The Fund has no limitations on principal, interest or reset terms on debt securities held in the Fund.
With respect to equity securities, the Fund managers emphasize dividend-paying stocks that over time have exhibited consistent growth of dividends, but may sell investments to secure gains, limit losses or reinvest
in more promising investment opportunities.
|(As of 4/30/17)||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||15 YR||Since Inception
|Buffalo Flexible Income Fund||0.45||0.88||8.28||3.02||6.58||5.62||6.85||7.12|
|S&P 500 Index||5.16||7.16||17.92||10.47||13.68||7.15||7.61||9.59|
|Lipper Mixed-Asset Target Allocation Moderate Funds Index||3.34||5.23||10.39||4.84||7.14||4.53||5.67||6.95|
|Morningstar Allocation--50% to 70% Equity||3.99||6.03||12.57||4.85||8.22||4.33||5.98||-|
|(As of 3/31/17)||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||15 YR||Since Inception
|Buffalo Flexible Income Fund||1.61||1.61||11.02||3.90||6.78||6.05||6.69||7.18|
|S&P 500 Index||6.07||6.07||17.17||10.37||13.30||7.51||7.09||9.58|
|Lipper Mixed-Asset Target Allocation Moderate Funds Index||4.23||4.23||10.61||4.71||6.91||4.69||5.47||6.94|
|Morningstar Allocation--50% to 70% Equity||4.81||4.81||12.55||4.51||7.85||4.53||5.79||-|
|Year||Buffalo Flexible Income||S&P 500 Index||Morningstar Allocation-50% to 70% Equity|
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.
|# of Equity Holdings||61|
|# of Fixed Holdings||22|
|Median Market Cap||$56.28 B|
|Weighted Average Market Cap||$133.72 B|
|3-Yr Annualized Turnover Ratio||17.35%|
|Average Duration||1.78 years|
|Average Maturity||4.23 years|
|30-day SEC Yield||1.18%|
As of 12/31/16. 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 3/31/17. 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 3/31/17. Allocation 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.
The Buffalo Flexible Income Fund produced a returned 1.61% for the quarter. During the same time period, the S&P 500 Index returned 6.07% and the Bank of America Merrill Lynch High Yield Master II Index returned 2.71%. The equity portion of the portfolio, which represented about 80% of the Fund’s total investments at the end of the period, produced a return of 1.47% during the quarter.
The Fund’s equity component is primarily focused on large capitalization companies that are current or potential dividend payers which we also believe possess significant competitive advantages. The primary sectors that led to the underperformance during the period were energy and information technology. The underperformance in energy was primarily driven by sec-tor allocation as the Fund was significantly overweight the worst performing sector of the S&P 500 Index. The underperformance in information technology was due to both sector allocation and security selection. The Fund was underweight in its exposure to technology, which was the best performing sector during the quarter. As it relates to disappointing stock performance in technology, QUALCOMM and Intel were the primary detractors to relative results. QUALCOMM was negatively impacted during the quarter by several lawsuits including one by Apple, Inc. (a large customer) and by regulatory reviews from the U.S. Federal Trade Commission and Korea. Meanwhile Intel’s stock declined due to lower guidance for 2017 on its earnings call during the period. On an absolute basis, the top contributors to the Fund in the quarter were Boeing, Dow Chemical and GlaxoSmithKline while the top detractors were HollyFrontier, Pitney Bowes and ExxonMobil.
The fixed income portion of the Buffalo Flexible Income Fund generated a return of 2.15% for the first quarter and underperformed the Bank of America Merrill Lynch Master II Index which generated a return of 2.71%. The primary sectors detracting from performance were consumer discretionary and energy. The underperformance in the discretionary sector relative to the benchmark reflects both an overweight sector allocation and disappointing security selection. Lions Gate Entertainment, Inc. underperformed due to a mixed fourth quarter earnings report. Meanwhile within energy, the underperformance was due to Approach Resources and Wildhorse Resource Development. Both of these companies were negatively impacted by weaker oil prices during the quarter. The top contributors to the Funds fixed income performance included Medicines Company, Valeant and Nuance Communications while the three top detractors were Lions Gate Entertainment, Approach Resources and Consolidated Communications.
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.
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.
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FOR INDIVIDUAL INVESTORS
The Buffalo Flexible Income Fund received 2 stars among 345 for the three-year, 2 stars among 285 for the 4/30/17.
Bond ratings are grades given to bonds that indicates their credit quality as determined by a private independent rating service such as [Standard & Poor's or Moody’s, etc.]. The firm evaluates a bond issuer's financial strength, or its ability to pay a bond's principal and interest in a timely fashion. Ratings are expressed as letters ranging from 'AAA', which is the highest grade, to 'D', which is the lowest grade. Not Rated category includes holdings that are not rated by any rating agencies.