Quick Facts
InvestorInstitutional
Ticker:BUFGXBIIGX
Inception Date:5/19/19957/1/2019
Expense Ratio:0.93%0.79%
Total Net Assets:$187.47 Million  (9/30/20)
Category:Large Cap Growth
Benchmark:Morningstar U.S. Growth
Related Material:
   Fund Fact Sheet Q3 2020
   PM Commentary Q3 2020
   Summary Prospectus
Fund Objective & Investment Process

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 Morningstar U.S. Growth Index, whichever is lower. Capitalization of the Morningstar U.S. Growth Index changes due to market conditions and index composition.

With respect to the remaining 25% of the equity weighting of the Fund’s portfolio, the Fund may invest in companies of any size, including, but not limited to, those with market capitalizations less than the lower of the median of the Morningstar U.S. Growth Index or $5 billion.

The Fund managers seek to identify companies that are expected to experience growth based on the identification of long-term, measurable secular trends, and which, as a result, the managers believe may have potential revenue growth in excess of the gross domestic product growth rate. Companies are screened using in-depth, in-house research to identify those which the managers believe have favorable attributes, including attractive valuation, strong management, conservative debt, free cash flow, scalable business models, and competitive advantages.

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The Growth Fund invest in secular trend leaders: attractively-priced, financially-strong, well-managed companies across all market cap segments, which we believe are favorably positioned to harvest the lion’s share of big secular growth trends.

Dave Carlsen, CFA, Co-Portfolio Manager

Morningstar Rating

       

Overall Morningstar Rating™ of BUFGX based on risk-adjusted returns among 1,229 Large Growth funds as of 9/30/20.

Investment Style

Performance (%)

As of 9/30/203 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO GROWTH FUND - Investor9.4714.4622.8817.23
15.5414.1510.437.7010.71
BUFFALO GROWTH FUND - Institutional9.5014.5823.0617.4015.7114.3210.597.8610.87
  Morningstar U.S. Growth Index11.7228.3941.3923.1419.9417.3011.715.12-
  Lipper Large Cap Growth Fund Index12.3924.6737.4220.8418.9115.9010.635.429.35
  Morningstar Large Growth Category11.5420.6432.1318.2216.9915.0110.396.509.28
As of 9/30/203 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO GROWTH FUND - Investor9.4714.4622.8817.23
15.5414.1510.437.7010.71
BUFFALO GROWTH FUND - Institutional9.5014.5823.0617.4015.7114.3210.597.8610.87
  Morningstar U.S. Growth Index11.7228.3941.3923.1419.9417.3011.715.12-
  Lipper Large Cap Growth Fund Index12.3924.6737.4220.8418.9115.9010.635.429.35
  Morningstar Large Growth Category11.5420.6432.1318.2216.9915.0110.396.509.28
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
BUFGX vs Morningstar U.S. Growth Index (As of 9/30/20)
Upside Capture79.52
Downside Capture99.47
Alpha-3.17
Beta0.91
Sharpe Ratio0.88
Hypothetical Growth of $10,000
This chart illustrates the performance of a hypothetical $10,000 investment made in the Fund on the inception date of the benchmark index (6/30/97). This chart does not imply future performance.

Portfolio

Portfolio Characteristics
(As of 9/30/20) 
 
# of Holdings52
Median Market Cap$83.59 B
Weighted Average Market Cap$550.94 B
3-Yr Annualized Turnover Ratio27.96%
% of Holdings with Free Cash Flow92.31%
Active Share56.40%
Top 10 Holdings
Name of HoldingTickerSector% of Net
Assets
MicrosoftMSFTTechnology8.55%
AmazonAMZNConsumer Discretionary5.74%
MastercardMAFinancials3.09%
Alphabet (C)GOOGTechnology3.09%
AppleAAPLTechnology3.07%
Danaher CorpDHRHealth Care2.83%
Home DepotHDConsumer Discretionary2.72%
LindeLINMaterials2.68%
Alphabet (A)GOOGLTechnology2.59%
VisaVFinancials2.21%
TOP 10 HOLDINGS TOTAL36.57%
As of 6/30/20. 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.
Sector Weighting
As of 9/30/20. 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 9/30/20. Market Cap percentages may not equal 100% due to rounding.

Management

Dave Carlsen, CFA
Portfolio Manager

27 Years of Experience

 View full bio

Josh West, CFA
Portfolio Manager

15 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 6/30/20) — Equity markets rebounded sharply in the 2nd quarter following steep losses in the previous period. The S&P 500 Index produced a return of 20.54%, marking the best quarterly performance results in 20 years. Stimulus efforts by the Federal Reserve (the “Fed”) and the U.S. Treasury Department to limit COVID-related economic damage helped equity markets find a floor in late March. Declining COVID-19 case counts, optimism about treatment and potential vaccines, along with better-than-expected economic data also contributed to improved investor sentiment during the period. Although confirmed virus cases began spiking again in the final days of June, it was not enough to undo the best quarterly market results since the dot-com boom.

The broad market Russell 3000 Index advanced 22.03% in the quarter, and Growth outperformed Value as the Russell 3000 Growth Index moved up 27.99% during the period, compared to the Russell 3000 Value Index’s advance of 14.55%. Relative performance was inversely-correlated by market cap as the Russell Micro Cap Index advanced 30.54%, well above the large cap Russell 1000 Index’s return of 21.82%. Meanwhile the small cap Russell 2000 Index and the Russell Mid Cap Index were up 25.42% and 24.61%, respectively. The best performing sectors were Technology, Consumer Discretionary, and Energy while the less cyclically exposed, more defensive areas like Utilities, Telecommunication, and Consumer Staples lagged in the quarter.

PERFORMANCE COMMENTARY

(As of 6/30/20) — The Buffalo Growth Fund (BUFGX) returned 24.48% during the quarter, trailing the Morningstar U.S. Growth Index’s gain of 29.86%. Stock selection in the Consumer Discretionary sector and the drag from un-invested cash were the leading causes of relative underperformance. Within the Consumer Discretionary sector, most of the underperformance was driven by not owning Tesla, a relatively large benchmark position, which was up over 100% in the quarter. Across the entire portfolio, underexposure to companies with no earnings and stocks, with what we believe to be sky-high valuation multiples, hurt relative performance. With interest rates expected to be “lower for longer”, sales growth was rewarded over profitability and valuation-sensitivity during the market rebound. Regarding our un-invested cash, while not a level we consider elevated, cash averaged 3.6% of Fund assets, and any allocation to cash holds back performance when the market is up almost 30%.

TOP CONTRIBUTORS

Microsoft was the top contributor for the Fund during the quarter, returning 29%. The company’s business has been insulated from COVID-19 slowdowns, driven by an increase in remote work and learning. Growth in its cloud services and Office 365 products has remained strong, and we believe the company’s growth outlook is solid, regardless of the trajectory of the pandemic.

Amazon was another top contributor, with shares up 41%. The ongoing shift to ecommerce accelerated during the quarter as consumers avoided brick-and-mortar stores during the pandemic. Furthermore, the company’s web services division is also well positioned to benefit from the growing need for cloud computing in a world with more people working from home.

TOP DETRACTORS

The Fund’s biggest detractors were both victims of the low interest rate environment. Wells Fargo was down 9% in the quarter, and, without a sharp rebound in economic activity, with the potential to drive interest rates higher, the outlook for banks is uninspiring. As a result, we eliminated the position from the Fund to invest in more attractive near term opportunities, by our analysis. CME Group was also hurt by lower interest rates, as lower volatility in interest rates during the period led to lower volumes, as market participants did not feel a need to hedge interest rate exposures.

OUTLOOK

(As of 6/30/20) — After a turbulent start to the year, the focus remains on the trajectory of the pandemic and the associated economic fallout. Unfortunately, the gradual reopening of the economy has led to a surge in new virus cases. We expect state and local governments to resist shutting down economies again with strict shelter in place orders. However, as hospital utilization approaches capacity in some regions, stricter quarantines may be called for, dealing a setback to the economic recovery. On the positive side, several vaccines appear to show promise in immunizing people from the virus. The availability of a vaccine or cure would, obviously, be a welcome development and lead to more rapid and broader economic growth.

We are also paying attention to the upcoming elections, and, while Democrats are currently expected to have a good day on the first Tuesday in November, it is not clear to us that this outcome is being discounted in the share prices of some companies that could be affected by policy changes.

While the timing and trajectory are unclear, the pandemic will end someday and the economy will recover. When that happens, economic growth will broaden and the scarcity value of growth in equity markets will diminish. The recent outperformance of “growth at any price” cannot continue forever, and a reversal in market leadership is likely to be painful for investors that have ignored valuations. While we expect volatility to remain high, it will not change our investment philosophy. We will continue to invest in businesses with solid growth opportunities, durable competitive advantages, scalable business models, and good management teams, when they are trading at attractive valuations, in our opinion. Thank you for your continued support.

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. Investing in both actively and passively managed mutual funds involves risk and principal loss is possible. 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
  RMD Waiver   NEW
  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 Growth Fund (BUFGX) received 3 stars among 1,229 for the 3-year, 3 stars among 1,095 for the 5-year, and 3 stars among 813 Large Growth funds for the 10-year period ending 9/30/20.

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. ©2020 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.