Quick Facts

(As of 6/30/17)

Ticker
  BUFGX

Inception Date
  May 19, 1995

Total Fund Assets
  $310.2 Million

Expense Ratio
  0.92%

Benchmark Index
  Russell 1000 Growth

MORNINGSTAR RATING

Overall Morningstar™ rating out of 1,258 Large Growth funds as of 8/31/17 (derived from a weighted average of the fund’s three-, five-, and ten-year risk adjusted return measure).

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

The Morningstar™ Risk vs Category rating is an assessment of the variations in a fund’s monthly returns, with an emphasis on downside variations, in comparison to the 1,258 funds in the Large Growth category, as of 8/31/17.

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 8/31/173 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/19/95)
Buffalo Growth Fund1.5313.7411.988.0012.918.269.649.81
  Russell 1000 Growth Index4.2619.1720.8211.6715.419.399.758.93
  Lipper Large Cap Growth Fund Index4.5322.6921.5710.2014.628.108.527.88
  Morningstar Large Growth3.9518.1818.819.1613.887.959.138.12
As of 6/30/173 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/19/95)
Buffalo Growth Fund3.6311.9815.947.7313.658.058.739.81
  Russell 1000 Growth Index4.6713.9920.4211.1115.308.919.038.78
  Lipper Large Cap Growth Fund Index6.3117.2222.679.6414.467.647.677.72
  Morningstar Large Growth5.0114.1420.028.8013.877.518.208.00
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
(As of 6/30/17)

vs Russell 1000 Growth Index
Upside Capture77.87
Downside Capture92.47
Alpha-1.70
Beta0.87
Standard Deviation9.85
Sharpe Ratio0.76

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.

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 6/30/17)

# of Holdings60
Median Market Cap$76.55 B
Weighted Average Market Cap$181.80 B
3-Yr Annualized Turnover Ratio28.20%
% of Holdings with Free Cash Flow77.59%
% of Holdings with No Net Debt27.59%
Active Share67.96%
Name of HoldingTickerSector% of Net Assets
FacebookFBTechnology4.74%
AppleAAPLTechnology4.19%
Amazon.comAMZNConsumer Discretionary3.10%
Alphabet CGOOGTechnology3.04%
VISAVTechnology2.76%
Alphabet AGOOGLTechnology2.61%
Home DepotHDConsumer Discretionary2.48%
Align TechnologyALGNTechnology2.42%
BaxterBAXHealth Care2.39%
Intercontinental ExchangeICEFinancials2.33%
TOP 10 HOLDINGS TOTAL30.05%
View Full Holdings

As of 3/31/17. 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 6/30/17. 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 continued their strong start to the year during the second quarter, primarily driven by strong corporate earnings growth. The Russell 3000 Index advanced 3.02% in the second quarter. As reported during the June 30 period, earnings from S&P 500 Index companies were up 14% year-over-year in the first quarter, the strongest growth reading since 2011.

Broadly speaking, growth stocks continued their outperformance relative to value stocks, while cyclical stocks that rallied to end 2016 underperformed as investors continue to discount the likelihood of government infrastructure spending and comprehensive tax reform.

The yield on the U.S. 10-year Treasury ended the June 30 period at 2.298%, a decline from its recent high of 2.609% in March due in large part to weaker inflation readings. In contrast, the outlook for growth and interest rate expectations improved in much of the rest of the world, which has driven the trade weighted U.S. dollar down 5.6% year to date. Oil entered bear market territory, with crude prices declining 9% during the quarter in response to stronger than expected inventory levels and rising U.S. production.

As mentioned above investors continued to favor growth over value, and the Russell 3000 Growth Index climbed 4.65% during the period compared to the more modest gain of 1.29% for the Russell 3000 Value Index. By size, microcaps were the best performers with the Russell Microcap Index gaining 3.83%. Meanwhile the large cap Russell 1000 Index gained 3.06%, followed by the Russell Midcap Index at 2.70% and the Russell 2000 Index finishing with a gain of 2.46% during the period.

In general health care was the best performing sector as the chances for legislation to repeal or reform the Affordable Care Act appeared to diminish, and investors reacted by bidding up health care stocks. The technology sector was also a strong performer as the market continued to reward the strong earnings growth produced in this area. Conversely, energy was the worst performing sector driven by the decline in oil prices mentioned above.

PERFORMANCE COMMENTARY

The Buffalo Growth Fund returned 3.63% during the period compared to the benchmark Russell 1000 Growth Index return of 4.67%. Relative to the benchmark, energy, financials, and health care ended the quarter as the largest overweight sectors, while information technology and consumer discretionary were the most underweight.

Align Technology was the leading contributor for the fund during the quarter. Shares rallied on growth that inflected higher and was the best first quarter growth posted by the company in several years. Align is benefiting from a new aligner product that is cutting treatment times for dental patients, success in its direct to consumer efforts, and continued growth in penetration among orthodontists.

Other leading contributors for the fund during the quarter were Baxter International and Alphabet, the parent company of Google. Baxter’s shares rose on better than anticipated growth and margins reported during the period. Higher growth for the first quarter of the year alleviated investor concerns about sluggish growth in 2017. In addition, better margins have some forecasting management will surpass margin expansion goals for 2018 and 2020. Meanwhile Google continued to outperform as growth in online advertising, particularly mobile advertising, drove better than expected growth. With the success of Android and rapid growth in paid clicks on mobile, the company has proved that it is a primary beneficiary of growing advertising budgets targeting mobile audiences.

Detractors in the period included Advanced Auto, Schlumberger, and Oceaneering International. Advanced Auto’s shares remained under pressure after quarterly results disappointed with same store sales and margins contracting. The new management team is in the first year of a multi-year turnaround effort that has run into headwinds from slowing industry sales blamed primarily on milder weather that has led to less parts failure. Adding to investor concerns are rumors of Amazon potentially expanding its presence in the auto parts business, which combined with the weaker results have led to significant contraction in valuation multiples for the stock. Shares of Schlumberger and Oceaneering International were negatively impacted by the decline in oil prices during the second quarter. Both companies supply equipment and services to the oil industry and as the price of oil declines the forecast for drilling activity and industry profit declines with it.

OUTLOOK

Domestically, economic growth has not accelerated since the election of President Trump, as the anticipated policy shifts that fostered a year-end rally have stalled. In Europe, growth has come in better than expected and recent elections in France have decreased speculation of more member nations pursuing an exit from the European Union (EU). There is even discussion that the EU may begin to reign in its stimulative monetary policy stance, a shift already made in the U.S. and China. If the EU shifts to tighten monetary policy, then countries representing more than half the world’s gross domestic product (GDP) will be pursuing more restrictive monetary policy simultaneously. While there are no obvious signs of economic stress, tighter monetary policy is certainly reason for caution. In addition, valuation multiples have expanded following strong total returns produced by the stock market year-to-date. Based on these factors, we remain positioned to hedge capital on the downside, while being opportunistic in pursuit of high quality growth companies that may be unfairly punished.

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 1258 for the three-year, 3 stars among 1124 for the five-year, and 3 stars among 790 Large Growth funds for the ten-year period ending 8/31/17.

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.

©2017 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.