Quick Facts
InvestorInstitutional
Ticker:BUFGXBIIGX
Inception Date:5/19/19957/1/2019
Expense Ratio:0.92%0.77%
Total Net Assets:$215.04 Million  (6/30/21)
Category:Large Cap Growth
Benchmark:Morningstar U.S. Growth Index
Related Material:
   Fund Fact Sheet Q2 2021
   PM Commentary Q2 2021
   Summary Prospectus
Fund Objective & Investment Philosophy

The investment objective of the Buffalo Growth Fund is long-term growth of capital. The Fund invests in common stocks and other equity securities, including preferred stock, convertible securities, warrants and rights, with a goal of maintaining at least 75% of the Fund’s portfolio in companies with market capitalizations greater than the median of the Morningstar U.S. Growth Index or $5 billion, whichever is lower. The median market capitalization of the Morningstar U.S. Growth Index changes due to market conditions and also changes with the composition of the index. As of June 30, 2021, the median market capitalization of companies in the Morningstar U.S. Growth Index was approximately $6.8 billion.

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, whichever is lower.

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 1,128 Large Growth funds as of 8/31/21.

Investment Style

Performance (%)

As of 8/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO GROWTH FUND - Investor11.3319.2427.8120.0319.6516.3912.259.9311.54
BUFFALO GROWTH FUND - Institutional11.3319.3427.9820.2019.8316.5612.4210.1011.70
  Morningstar U.S. Growth Index16.0723.4831.9426.3425.7619.8314.0610.48-
  Lipper Large Cap Growth Fund Index12.3120.7427.8723.9723.7818.2912.809.7110.24
  Morningstar Large Growth Category11.0118.7528.7522.1022.1917.5712.5310.1310.16
As of 6/30/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO GROWTH FUND - Investor11.1712.0737.5119.9819.3714.6812.069.4311.35
BUFFALO GROWTH FUND - Institutional11.2112.1537.7120.1619.5514.8512.239.6011.52
  Morningstar U.S. Growth Index13.9014.6044.2426.2424.9118.1413.479.10-
  Lipper Large Cap Growth Fund Index11.8013.5641.9024.2423.6216.6912.318.7510.05
  Morningstar Large Growth Category10.2812.3841.7022.5621.9815.9912.139.2110.00

 2011201220132014201520162017201820192020
BUFFALO GROWTH FUND - Investor-0.0611.8635.408.882.644.8622.810.5131.9128.29
BUFFALO GROWTH FUND - Institutional0.0912.0335.609.052.805.0222.990.6632.1128.49
  Morningstar U.S. Growth Index0.7417.2733.3412.665.543.1629.520.7834.9044.65
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 6/30/21)
Upside Capture77.28
Downside Capture96.68
Alpha-3.12
Beta0.91
Sharpe Ratio1.00
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 6/30/21) 
 
# of Holdings52
Median Market Cap$107.93 B
Weighted Average Market Cap$721.19 B
3-Yr Annualized Turnover Ratio20.65%
% of Holdings with Free Cash Flow86.54%
Active Share53.93%
Top 10 Holdings
Name of HoldingTickerSector% of Net
Assets
MicrosoftMSFTTechnology10.76%
AmazonAMZNConsumer Discretionary6.44%
AppleAAPLTechnology5.83%
Alphabet (C)GOOGTechnology3.99%
Alphabet (A)GOOGLTechnology3.32%
MastercardMAFinancials3.29%
FacebookFBTechnology3.16%
Home DepotHDConsumer Discretionary2.48%
BroadcomAVGOTechnology2.25%
LindeLINMaterials2.19%
TOP 10 HOLDINGS TOTAL43.71%
As of 3/31/21. 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 6/30/21. 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 6/30/21. 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 6/30/21) — Equity markets moved higher for the fifth consecutive quarter, as the S&P 500 Index returned 8.55%, raising the year-to-date return to 15.25%. The COVID-19 vaccine rollout has helped fuel an economic comeback while corporate earnings are improving. The vaccine adoption around the world is encouraging, and over 50% of the U.S. population is now vaccinated. Capital markets continued to be supported by significant spending from Congress and aggressive monetary policy from the Federal Reserve (the Fed). The 2nd quarter was marked by outperformance of growth stocks, overcoming investor concerns of rising inflation and potential interest rate hikes in the prior quarter. Hawkish comments from the Fed replaced inflation worries with concerns about the magnitude and duration of the economic recovery. Long duration growth companies were beneficiaries as yields on the 10-Year and 30-Year Treasuries declined during the period after climbing for the previous four months.

The broad market Russell 3000 Index advanced 8.24% in the quarter. Growth stocks outperformed Value stocks, as the Russell 3000 Growth Index surged 11.38% compared to the Russell 3000 Value Index gain of 5.16%. Relative performance was correlated with market cap size in the quarter, as the large cap Russell 1000 Index returned 8.54%, the Russell Midcap Index advanced 7.50%, the small cap Russell 2000 Index returned 4.29%, and the Russell Microcap Index finished 4.14% higher.

All economic sectors produced positive returns during the period with the exception of Telecom Services. Real Estate, Information Technology, and Energy led the advance followed by Financials and Health Care. More defensive areas, such as Telecom Services, Utilities, and Consumer Staples, trailed on a relative basis.

PERFORMANCE COMMENTARY

(As of 6/30/21) — The Buffalo Growth Fund (BUFGX) gained 11.17% in the 2nd quarter, but trailed the Morningstar U.S. Growth Index’s gain of 13.90%. Strong stock selection in Health Care and Industrials was offset by underperformance in the Fund’s Technology and Consumer Discretionary holdings. In short, our valuation discipline was the root of the relative underperformance in the quarter. Long-term Treasury yields fell in the quarter after jobs reports surprised to the downside, inflation reports surprised to the upside, and Federal Reserve communications turned slightly more hawkish. Within equity markets, the main beneficiaries of lower long-term interest rates were long-duration (high valuation) growth stocks, where the Fund is underweight relative to the Index.

TOP CONTRIBUTORS

Microsoft Corporation was the top contributor to performance in the 2nd quarter. The company reported a strong quarter driven by rapid growth in Azure revenues, as their enterprise customers accelerated cloud migrations. Furthermore, forward guidance appears conservative considering the strong commercial bookings in the quarter.

Alphabet Inc. was another top contributor. A recovery in advertising spending led to the company reporting earnings that were 67% ahead of expectations. Strength was broad-based, driven by the search business, YouTube, and Google Cloud.

Amazon.com continues the trend of top contributors benefiting from strong cloud growth, with AWS revenues up 32%. Ecommerce sales showed resiliency, and advertising revenues rebounded. Revenue from physical stores was the only weak spot but should improve going forward, barring a rebound in COVID cases.

TOP DETRACTORS

Two of the top detractors in the period, TripAdvisor Inc. and Booking Holdings, were caught up in general travel industry weakness. The rise of the Delta variant drove some countries to reinstate previously-abandoned lockdown measures, causing investors to push out their projections for a broad travel recovery. Furthermore, the decline in interest rates led investors to sell economically-sensitive companies to fund the purchase of companies with higher secular growth profiles.

Global Payments also detracted from the Fund’s performance. Despite reporting a strong quarter, investors were concerned the company didn’t raise annual guidance by the amount of the beat, implying a slowdown in the 2nd half of the year. Additionally, investors responded to changing interest rates by rotating from payment stocks to banks and/or faster growing “fintech” companies.

OUTLOOK

(As of 6/30/21) — The most prominent debates among investors are whether inflation is transitory or resilient and whether economic growth is self-sustaining or likely to fizzle when stimulus is removed. The year started with increasing optimism about the recovery, and we saw the 10-Year Treasury yield increase from 0.9% to 1.7%. Since then, we’ve been surprised by bad jobs data, labor shortages, port closures, and shipping bottlenecks, as well as increasing COVID cases driven by the Delta variant. As a result, the 10-Year Treasury yield dropped to 1.3%.

In our view, demand is strong and capacity is holding back economic growth. We expect job growth to improve as enhanced unemployment benefits roll off, schools reopen to in-person learning (providing would-be workers with child care), and offices continue to reopen. While the Delta variant is concerning, early indications are that vaccines are effective at preventing hospitalizations and deaths. As vaccination rates improve worldwide, supply constraints should ease. We believe that the global reopening has been delayed and that as these supply side bottlenecks ease, economic growth will remain relatively strong.

So, what are we doing about it? The answer is not much. We believe the portfolio is well-positioned for an environment of increased economic optimism and higher long-term interest rates. But this is a result of our bottom-up process, not the implementation of any top-down view. We are under-exposed to hyper-growth companies with sky high valuation multiples because we don’t think they currently present us with an attractive risk/reward profile. While we are mindful of macroeconomic fluctuations, they do not drive our investment process. 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. We 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
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Class
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  New Account Application
  New Account Application - Entity
  Change or Add Account Details
  Cost Basis Method Election
  Power of Attorney
Individual Retirement Account (IRA) Forms
  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 1,128 for the 3-year, 2 stars among 1,020 for the 5-year, and 2 stars among 760 Large Growth funds for the 10-year period ending 8/31/21.

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.