Quick Facts
InvestorInstitutional
Ticker:BUFGXBIIGX
Inception Date:5/19/19957/1/2019
Expense Ratio:0.93%0.79%
Total Net Assets:$201.10 Million  (12/31/20)
Category:Large Cap Growth
Benchmark:Morningstar U.S. Growth
Related Material:
   Fund Fact Sheet Q4 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 1,197 Large Growth funds as of 12/31/20.

Investment Style

Performance (%)

As of 12/31/203 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO GROWTH FUND - Investor12.0828.2928.2919.37
16.9814.0011.288.4411.09
BUFFALO GROWTH FUND - Institutional12.1428.4928.4919.5517.1614.1711.458.6011.25
  Morningstar U.S. Growth Index12.6644.6544.6525.2821.3217.2812.377.46-
  Lipper Large Cap Growth Fund Index11.1838.6038.6022.5919.5515.8011.157.079.71
  Morningstar Large Growth Category12.5035.8635.8620.5018.3015.1411.067.919.69
As of 12/31/203 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO GROWTH FUND - Investor12.0828.2928.2919.37
16.9814.0011.288.4411.09
BUFFALO GROWTH FUND - Institutional12.1428.4928.4919.5517.1614.1711.458.6011.25
  Morningstar U.S. Growth Index12.6644.6544.6525.2821.3217.2812.377.46-
  Lipper Large Cap Growth Fund Index11.1838.6038.6022.5919.5515.8011.157.079.71
  Morningstar Large Growth Category12.5035.8635.8620.5018.3015.1411.067.919.69
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 12/31/20)
Upside Capture81.74
Downside Capture100.90
Alpha-3.21
Beta0.92
Sharpe Ratio0.95
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 12/31/20) 
 
# of Holdings54
Median Market Cap$96.07 B
Weighted Average Market Cap$571.23 B
3-Yr Annualized Turnover Ratio26.58%
% of Holdings with Free Cash Flow92.59%
Active Share56.86%
Top 10 Holdings
Name of HoldingTickerSector% of Net
Assets
MicrosoftMSFTTechnology10.15%
AmazonAMZNConsumer Discretionary6.92%
AppleAAPLTechnology5.85%
MastercardMAFinancials3.30%
Alphabet (C)GOOGTechnology2.99%
FacebookFBTechnology2.97%
Home DepotHDConsumer Discretionary2.81%
Alphabet (A)GOOGLTechnology2.50%
NikeNKEConsumer Discretionary2.38%
LindeLINMaterials2.29%
TOP 10 HOLDINGS TOTAL42.16%
As of 9/30/20. 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 12/31/20. 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 12/31/20. Market Cap percentages may not equal 100% due to rounding.

Management

Dave Carlsen, CFA
Portfolio Manager

29 Years of Experience

 View full bio

Josh West, CFA
Portfolio Manager

16 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 9/30/20) — Equity markets sustained their momentum in the 3rd quarter, with the S&P 500 Index returning 8.93%. Macro data continued to improve, and companies broadly reported earnings that proved to be more resilient than expectations. While the U.S. experienced another spike in COVID-19 cases during the quarter and tragically surpassed 200,000 deaths, positive news on vaccines and therapy fronts continued to provide hope for investors.

The Russell 3000 Index increased 9.21% in the quarter. Growth continued to outperform value, as the Russell 3000 Growth Index advanced 12.86%, compared to the Russell 3000 Value Index return of 5.41%. Relative performance was correlated with market cap size in the quarter, with the large cap Russell 1000 Index delivering a return of 9.47%, compared to the Russell Mid Cap Index return of 7.46%, the smaller cap Russell 2000 Index return of 4.93%, and the Russell Micro Cap Index return of 3.69%. More cyclically-exposed Consumer Discretionary, Materials, and Industrial sectors performed best in the quarter. Energy was the sole declining sector, hurt by lingering weakness in oil demand.

PERFORMANCE COMMENTARY

(As of 9/30/20) — The Buffalo Growth Fund (BUFGX) gained 9.47% in the 3rd quarter of 2020 versus the Morningstar U.S. Growth Index’s gain of 11.72%. 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 nearly 100% in the quarter. Across the entire portfolio, underexposure to companies with no earnings and stocks, with what we believe to be unsustainable valuation multiples, hurt relative performance. With interest rates expected to be “lower for longer”, sales growth was rewarded over profitability and valuation-sensitivity in the quarter. Regarding our un-invested cash, while not a level we consider elevated, cash averaged 2.77% of Fund assets, and any allocation to cash holds back performance when the market is up almost 12%.

TOP CONTRIBUTORS

Apple (AAPL) shares increased over 27% during the quarter, making it the biggest contributor to the Fund’s quarterly return. The company is experiencing better-than-expected demand improvement, driven by the work/learn from home trend and a rebound in international sales as global markets reopen. Apple’s handset sales growth is likely to benefit from the upcoming 5G iPhone introduction which should mark the beginning of a 2-year handset upgrade cycle for the company.

Amazon (AMZN) was another top contributor, with shares up over 14%. The ongoing shift to ecommerce continued 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

Illumina (ILMN) is a global leader in sequencing tools and consumables for genetic and genomic analysis. Shares were pressured in the quarter after it revealed that instrument sales were being negatively-impacted by shutdowns and low utilization at research and medical labs. The company expects utilization to have troughed in the 2nd quarter with sequential improvement through year end.

RealPage (RP) is a leading provider of hosted software and data analytics to the real estate industry. Its solutions enable the rental real estate industry to manage property operations more efficiently. The stock was weak in the quarter as investors fear the negative effects of higher unemployment and deurbanization may weigh on occupancy rates and yield at rental properties. However, lower occupancy rates may help drive increased sales for RealPage as property managers have to invest in marketing and operational solutions that aid in attracting new tenants.

OUTLOOK

(As of 9/30/20) — The first nine months of 2020 have been an extremely volatile period for the market, and given the market’s quick rebound despite a slower economy, lower earnings, political uncertainty, and continued COVID-19 concerns, a lot rests on the trajectory of earnings recovery in 2021. Volatility is likely to remain in place at least through the early November election, but the good news is that it should ease once we get a clearer picture of fiscal stimulus plans and the policy biases of the next administration. Investors will then likely continue to focus on the trajectory of COVID-19 cases, the progression of additional treatments and vaccines, and ongoing company commentary on business trends. We believe there will be a meaningful amount of data on vaccine and treatment options over the next few months that could be quite positive for those willing to look beyond near-term case numbers. Furthermore, regardless of who will be in the Oval Office, fiscal and monetary policy remain extremely accommodative worldwide, with activity levels rebounding across countries and sectors. The economy is mending. Consumer and business confidence are rising too as the world has found innovative ways to adapt, progress and grow despite the 100-year pandemic in our midst.

While the election remains a wildcard, the market has taken Biden’s early lead and greater chances of a Democratic sweep in stride, contrary to prevailing wisdom that the market would suffer. Due to a reduction in growth opportunities in the last 6-9 months, we are mindful that investors may have bid up certain high growth stocks to unsustainable valuations, and we continue to focus on the downside risk relative to upside opportunity for stocks in the portfolio. The disparity in returns between growth and value has been extreme this year, and at some point, there could be a meaningful reversion to the mean, likely triggered by lower political uncertainty and successful clinical results from a potential vaccine. Going forward, we think lower political uncertainty and a probable COVID-19 vaccine could steepen the yield curve and should be good for more economically sensitive areas at the expense of over-priced growth stocks, and we are adjusting the portfolio accordingly.

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.

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

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Forms
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Individual Retirement Account (IRA) Forms
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Coverdell Education Savings Accounts (ESA) Forms
  Coverdell ESA Application
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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 1,197 for the 3-year, 3 stars among 1,070 for the 5-year, and 3 stars among 789 Large Growth funds for the 10-year period ending 12/31/20.

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. ©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.