Quick Facts
InvestorInstitutional
Ticker:BUFGXBIIGX
Inception Date:5/19/19957/1/2019
Expense Ratio:0.92%0.77%
Total Net Assets:$185.46 Million  (12/31/19)
Category:Large Cap Growth
Benchmark:Morningstar U.S. Growth
Related Material:
   Fund Fact Sheet Q4 2019
   PM Commentary Q4 2019
   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 1,215 Large Growth funds as of 2/29/20.

Investment Style

Performance (%)

As of 2/29/203 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO GROWTH FUND - Investor-4.16-6.469.6412.449.2412.799.346.7010.07
BUFFALO GROWTH FUND - Institutional-4.16-6.469.7912.609.4012.969.506.8610.24
  Morningstar U.S. Growth Index0.14-2.5314.4816.9211.9914.7610.123.34-
  Lipper Large Cap Growth Fund Index-1.14-3.8513.2515.7511.3413.449.213.938.44
  Morningstar Large Growth Category-2.33-4.7910.7813.5010.0413.019.125.368.50
As of 12/31/193 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO GROWTH FUND - Investor7.3531.9131.9117.65
11.8813.549.777.5510.44
BUFFALO GROWTH FUND - Institutional7.4032.1132.1117.8212.0413.719.947.7110.61
  Morningstar U.S. Growth Index10.1334.9034.9020.7613.9014.8310.093.74-
  Lipper Large Cap Growth Fund Index10.0933.3933.3920.5213.2013.669.284.188.67
  Morningstar Large Growth Category9.3531.7131.7118.1011.9812.898.656.348.77
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 12/31/19)
Upside Capture82.14
Downside Capture91.26
Alpha-0.43
Beta0.88
Sharpe Ratio1.30
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 12/31/19) 
 
# of Holdings58
Median Market Cap$61.19 B
Weighted Average Market Cap$268.06 B
3-Yr Annualized Turnover Ratio26.69%
% of Holdings with Free Cash Flow87.93%
Active Share60.46%
Top 10 Holdings
Name of HoldingTickerSector% of Net
Assets
MicrosoftMSFTTechnology6.53%
AmazonAMZNConsumer Discretionary3.63%
MastercardMAFinancials2.95%
Alphabet (C)GOOGTechnology2.94%
Abbott LabsABTHealth Care2.73%
AppleAAPLTechnology2.73%
AlphabetGOOGLTechnology2.63%
LindeLINMaterials2.54%
Danaher CorpDHRHealth Care2.32%
NikeNKEConsumer Discretionary2.26%
TOP 10 HOLDINGS TOTAL28.53%
As of 12/31/19. 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 12/31/19. 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 12/31/19. Market Cap percentages may not equal 100% due to rounding.

Management

Clay Brethour, CFA
Portfolio Manager

27 Years of Experience

 View full bio

Dave Carlsen, CFA
Portfolio Manager

27 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 12/31/19) — The combination of a U.S. Federal Reserve (Fed) interest rate cut, an improving economic outlook, and easing trade tensions, sent equity markets sharply higher in the 4th quarter. The S&P 500 Index advanced 9.10% during the period, which brought the full-year (2019) gain to 31.49%. The Fed cut interest rates three times in 2019, erasing the brief yield curve inversion and assuaging fears of a recession. The economy continued to add new jobs at a strong pace and unemployment declined to 3.5%. Consumer spending remained healthy, and there is optimism for better business investment following the announced “phase one” trade deal with China.

Similar to the S&P 500 Index, the broad-based Russell 3000 Index returned 9.04% during the quarter. Growth outperformed value, as the Russell 3000 Growth Index returned 10.62% compared to a return of 7.41% for the Russell 3000 Value Index. Smaller companies outperformed larger companies, as one would expect in a “risk-on” period. The Russell Microcap Index surged 13.45% and the Russell 2000 Index advanced 9.94%. Large company benchmarks such as the Russell 1000 Index advanced 9.04% while the Russell Midcap Index produced a return of 7.06%. Technology and Health Care were the best performing sectors in the quarter, while more defensive areas of the market lagged such as Real Estate and Utilities. Higher long-term interest rates weighed on high-quality bond proxies – the safe haven 10-year U.S. Treasury Bond produced a return of -1.74% during the quarter.

PERFORMANCE COMMENTARY

(As of 12/31/19) — The Buffalo Growth Fund (the “Fund”) returned 7.35% during the quarter, underperforming the Morningstar U.S. Growth Index (the “Index”) which returned 10.13%. Although absolute performance was strong during the period, the Fund’s relative underperformance was primarily due to stock selection within Health Care and holding some cash in a rising market. Additionally, the improved economic picture, alleviated trade tensions between the U.S. and China, and dovish monetary policy from the Fed helped cyclical stocks rebound in the quarter, an underweighted area for the Fund.

Sectors that had positive relative performance during the quarter were Consumer Staples, Materials, Real Estate, Information Technology, and Energy. Health Care produced a positive return for the quarter, but our underweight to the managed care industry led to relative underperformance, as that area rallied as “Medicare for All” discussions diminished. The Fund also underperformed within Financials and Industrials as banks and cyclical stocks rallied during the quarter on better economic data.

TOP CONTRIBUTORS

Top contributors during the period were Microsoft and Apple. Microsoft’s stock rallied steadily throughout 2019 as the company has been successfully transitioning to the cloud to increase recurring subscription revenue from Azure and Office 365. We believe these two drivers of growth for Microsoft provide a tailwind to offset the declining PC market trend. Meanwhile, Apple, which had been relatively weak during early summer due to concerns about the iPhone cycle and slowing sales in China, rebounded during the second half of the year. We anticipate that revenue growth should re-accelerate given the product launches announced last fall, particularly the 5G iPhone that is expected to be available in 2020.

TOP DETRACTORS

In terms of individual stock results, The Home Depot was the largest detractor from performance during the quarter. At the company’s Investor Meeting in November, management guided 2020 revenue and margins lower due to an unfavorable product mix and shrink (theft), which disappointed investors. The company is implementing initiatives to address both issues, which we believe will set operating margin back on a rising trajectory in 2021.

OUTLOOK

(As of 12/31/19) — The market environment appears fertile for active growth stock investing. Interest rates, inflation, and unemployment remain relatively low by historical standards, providing a healthy backdrop for corporate earnings growth. Meanwhile, global central bankers have recently pledged additional stimulus measures to keep the long-running economic expansion alive. Concerns included relatively high valuations and deteriorating leading indicators on global trade. “Easy money” policies for much of the past 10 years, and rising expectations for more to come, have led to asset inflation and elevated growth stock valuations. Meanwhile, global trade tensions are weighing on consumer and business confidence where recent surveys point to a slowdown amongst global purchasing managers.

Based on these factors, we believe a more discerning market could materialize throughout 2020 with an increase in volatility. An uptick in volatility may favor active management and judicious growth stock investors where a steady hand and an eye toward quality, improving profit cycle dynamics, and attractive risk-adjusted return potential could hold an advantage. Economic conditions may ebb and flow, but our focus remains steadfast on investing in attractively-priced, financially-strong, well-managed companies benefiting from long-term secular growth opportunities.

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
  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 1,215 for the 3-year, 3 stars among 1,072 for the 5-year, and 3 stars among 809 Large Growth funds for the 10-year period ending 2/29/20.

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.