Quick Facts

(As of 3/31/17)

Ticker
  BUFGX

Inception Date
  May 19th, 1995

Total Fund Assets
  $332.3 M

Expense Ratio
  0.92%

Benchmark Index
  Russell 1000 Growth

MORNINGSTAR RATING

Overall Morningstar™ rating out of 1,301 Large Growth 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).

INVESTMENT STYLE

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

LOW HIGH

Overview

Investment Strategy

The investment objective of the Buffalo Growth Fund is long-term growth of capital. The Growth Fund invests in domestic common stocks and other U.S. equity securities, including preferred stock, convertible securities, warrants and rights, with a goal of maintaining at least 75% of the equity weighting of the Fund’s portfolio in companies with market capitalizations greater than $5 billion or the median of the Russell 1000® Growth Index ($8.9 billion as of 5/31/16), whichever is lower. Capitalization of the Russell 1000® Growth Index changes due to market conditions and index composition.

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We believe that actively investing in a relatively concentrated portfolio of great American companies will lead to superior wealth creation over time. We look for companies that could benefit from secular market trends, combined with the ability to extend competitive advantages across borders, to serve large, profitable and fast-growing markets abroad.

~ Dave Carlsen, Portfolio Manager

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Performance

(As of 4/30/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/19/95)
Buffalo Growth Fund6.7510.2716.198.6311.787.997.779.81
Russell 1000 Growth Index7.7711.4019.5012.1113.878.887.998.74
Lipper Large Cap Growth Fund Index8.3613.4619.2310.6412.407.556.697.62
Morningstar Large Growth7.1111.2017.819.9012.227.567.25-
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 3/31/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/19/95)
Buffalo Growth Fund8.068.0612.927.5811.098.207.159.75
Russell 1000 Growth Index8.918.9115.7611.2713.329.137.218.66
Lipper Large Cap Growth Fund Index10.2610.2615.778.9511.607.676.007.51
Morningstar Large Growth8.638.6314.858.5311.557.716.66-
Each Morningstar category average represents a universe of funds with similar objectives.
YearBuffalo Growth FundRussell 1000 Growth IndexMorningstar Large Growth Category
20164.867.083.23
20152.645.673.60
20148.8813.0510.00
201335.4033.4833.92
201211.8615.2615.34
2011-0.062.64-2.46
201023.2816.7115.53
200933.3437.2135.68
2008-32.69-38.44-40.67
20077.7611.8113.35
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 3/31/17)
vs Russell 1000 Growth Index
Upside Capture76.90
Downside Capture93.18
Alpha-1.99
Beta0.87
Standard Deviation9.91
Sharpe Ratio0.75

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.

Portfolio

(As of 3/31/17)
# of Holdings60
Median Market Cap$75.30 B
Weighted Average Market Cap$162.95 B
3-Yr Annualized Turnover Ratio27.23%
% of Holdings with Free Cash Flow80.00%
% of Holdings with No Net Debt25.00%
Active Share66.73%
HoldingTickerSector% of Portfolio
Facebook FBTechnology3.96%
Apple AAPLTechnology3.48%
Microsoft MSFTTechnology3.03%
Priceline PCLNConsumer Discretionary2.94%
Alphabet C GOOGLTechnology2.92%
Amazon.com AMZNConsumer Discretionary2.71%
Home Depot HDConsumer Discretionary2.61%
Alphabet A GOOGLTechnology2.51%
Visa VFinancial Services2.50%
Honeywell HONIndustrials2.36%
TOP 10 HOLDINGS TOTAL29.02%
View Full Holdings

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. Market Cap 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.

PERFORMANCE COMMENTARY

With this as the backdrop, the Buffalo Growth Fund returned 8.10% in the first quarter compared to the benchmark Russell 1000 Growth Index return of 8.91%. Relative to the benchmark, energy, financials, and health care ended the quarter as the largest overweight sectors. While information technology and consumer staples were the most underweight.

Among the leading contributors, Facebook shares rose on more robust growth in the fourth quarter with revenue, earnings, and user metrics all surpassing consensus estimates. These results helped to allay concerns from the prior quarter when management discussed increased spending and slower revenue growth for 2018. Next, Apple’s shares rallied on a better than expected quarter driven by upside in iPhone sales. While the latest iPhone was criticized for using the same design for three consecutive years, breaking a tradition of a new design every two years, Apple has strengthened its leadership in the smartphone market despite the naysayers. Finally, Priceline shares continued to outperform on better growth trends reported in 2016 compared to 2015. Priceline, an online travel agent, reported growth in hotel rooms booked in 2016 that surpassed 2015 indicating that it was gaining share from competitors.

Detractors in the period were Advanced Auto Parts, Qualcomm, and Verizon Communications. While Advanced Auto reported better sales growth at its stores during the quarter, profitability came in below guidance. The auto parts retailer reported that it incurred incremental expenses related to an ongoing turnaround. Specifically, management chose to reduce inventory levels and invest in customer service, both activities resulted in higher expenses in the quarter but should be beneficial to the turnaround efforts in future quarters, in our view. Next, Qualcomm shares declined after Apple filed a lawsuit against the company. Apple, through its contract manufacturers, is one of Qualcomm’s largest customers. It has alleged that Qualcomm acted to monopolize the market for wireless chipsets, a claim vigorously denied by Qaulcomm.

Finally, Verizon’s shares were lower in the quarter after providing disappointing financial guidance for 2017. Verizon has experienced renewed competitive intensity in wireless business as smaller competitors attempt to steal customers away with pricing and unlimited data offers. The company has sought to thwart competitors with matching offers and we believe remains in an enviable position as the market leader in subscribers and service quality.

OUTLOOK

We continue to hold a more positive view on the domestic economic outlook relative to the global outlook. In Europe, elections in France and Germany this year continue to brew uncertainty on the heels of the surprise vote by the United Kingdom to exit the European Union last summer (Brexit). In addition, Europe still suffers from a debt problem among many European Union member nations. Greece and Italy have been widely reported as highly indebted countries but several other nations are not far from burdensome debt levels as well. In Asia, Japan continues to limp along in a lethargic recovery, while China’s growth has moderated but remains at a high absolute level.

In the U.S., the initial optimism for economic stimulus from the new administration has diminished as President Trump met more resistance than expected in overhauling health care. This has resulted in the timeline being pushed out for policies expected to boost economic growth, such as tax reform and infrastructure spending. Even if approved, these growth boosting initiatives are unlikely to be significant in 2017 due to the delay caused by the focus on healthcare policy.

In this environment, we continue to stay focused on attempts to hedge capital from potential downside risks, while taking incremental risk when justified by positively skewed potential return outcomes.

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. 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.

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FOR INDIVIDUAL INVESTORS

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 Growth Fund received 3 stars among 1,301 for the three-year, 3 stars among 1,146 for the five-year, and 3 stars among 799 Large Growth category funds for the ten-year period ended 4/30/17.

The Morningstar Sustainability Rating™ is intended to measure how well the issuing companies of the securities within a fund’s portfolio holdings are managing their environmental, social, and governance, or ESG, risks and opportunities relative to the fund’s Morningstar Category peers. The Morningstar Sustainability Rating calculation is a two-step process. First, each fund with at least 50% of assets covered by a company-level ESG score from Sustainalytics receives a Morningstar Portfolio Sustainability Score. The Morningstar Portfolio Sustainability Score is an asset-weighted average of normalized company-level ESG scores with deductions made for controversial incidents by the issuing companies, such as environmental accidents, fraud, or discriminatory behavior. The Portfolio Sustainability Score ranges between 0 to 100, with a higher score indicating that a fund has, on average, more of its assets invested in companies that score well after normalization and controversy-level deductions are applied. The Morningstar Sustainability Rating is then assigned to all scored funds within Morningstar Categories in which at least ten (10) funds receive a Portfolio Sustainability Score and is determined by each fund's rank within the following distribution: High (highest 10%); Above Average (next 22.5%); Average (next 35%); Below Average (next 22.5%); Low (lowest 10%). The Morningstar Sustainability Rating is depicted by globe icons where High equals 5 globes and Low equals 1 globe. Since a Sustainability Rating is assigned to all funds that meet the above criteria, the rating it is not limited to funds with explicit sustainable or responsible investment mandates. Morningstar updates its Sustainability Ratings monthly. The Portfolio Sustainability Score is calculated when Morningstar receives a new portfolio. Then, the Sustainability Rating is calculated one month and six business days after the reported as-of date of the most recent portfolio. As part of the evaluation process, Morningstar uses Sustainalytics’ ESG scores from the same month as the portfolio as-of date. Please go here for more detailed information about the Morningstar Sustainability Rating methodology and calculation frequency.

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