Fund Objective & Investment Philosophy
The investment objective of the Buffalo International Fund is long-term growth of capital. The International Fund invests primarily in equity securities of established companies that are economically tied to various countries throughout the world (excluding the U.S.).
For purposes of the International Fund’s investments, “foreign securities” means those securities issued by companies:
- Organized under the laws of, or with a principal office in, a country other than the U.S. and issue securities for which the principal trading market is in a country other than the U.S.; or
- That derive at least 50% of their revenues or profits from goods produced or sold, investments made, or services provided in a country other than the U.S., or have at least 50% of their assets in a country other than the U.S.
- Under normal circumstances, the International Fund does not expect its investments in emerging markets to exceed 35% of its net assets.
In selecting securities for the International Fund, the Fund managers use a bottom-up approach in choosing investments, seeking companies expected to experience growth based on the identification of long-term, measurable industry, technological, global or other trends. Companies are screened using in-depth, in-house research to identify those which the Fund managers believe have favorable attributes, including: attractive valuation, strong management, conservative debt, free cash flow, scalable business models, and competitive advantages.
In making portfolio selections the Fund managers will also consider the economic, political and market conditions of the various countries in which the Fund may invest.
Overall Morningstar Rating™ of BUFIX based on risk-adjusted returns among 385 Foreign Large Growth funds as of 8/31/21.
When it comes to investing internationally, we believe our approach to stock selection is distinct. We are focused on finding good companies and aren’t constrained by benchmark alignment to countries or industries.
Our approach is based on finding companies with sound business models, exposure to long-term secular growth trends, and attractive risk/return growth and valuation characteristics, which we can own for the long-term.
Nicole Kornitzer, Portfolio Manager
|As of 8/31/21||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||Since Inception|
|BUFFALO INTERNATIONAL FUND - Investor||7.14||18.99||33.88||16.07||15.82||10.61||7.14|
|BUFFALO INTERNATIONAL FUND - Institutional||7.17||19.14||34.13||16.24||15.99||10.77||7.30|
|Morningstar Global Markets ex-US Index||0.02||10.02||26.03||9.67||10.17||7.10||3.63|
|Lipper International Fund Index||1.67||12.36||28.46||10.80||10.80||8.02||3.81|
|Morningstar Foreign Large Growth Category||4.17||10.97||25.81||14.80||13.72||9.64||4.77|
|As of 6/30/21||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||Since Inception|
|BUFFALO INTERNATIONAL FUND - Investor||8.97||11.42||39.21||14.62||15.71||9.04||6.72|
|BUFFALO INTERNATIONAL FUND - Institutional||9.01||11.57||39.47||14.80||15.88||9.20||6.88|
|Morningstar Global Markets ex-US Index||5.49||9.27||36.67||9.56||11.22||5.95||3.62|
|Lipper International Fund Index||4.69||9.69||35.74||10.05||11.40||6.57||3.68|
|Morningstar Foreign Large Growth Category||6.77||7.01||34.50||13.81||13.83||8.22||4.56|
|BUFFALO INTERNATIONAL FUND - Investor||-13.82||19.01||19.29||-2.04||-0.45||3.19||29.33||-8.85||28.02||19.10|
|BUFFALO INTERNATIONAL FUND - Institutional||-13.69||19.18||19.46||-1.89||-0.30||3.34||29.53||-8.71||28.20||19.24|
|Morningstar Global Markets ex-US Index||-13.89||17.36||15.71||-3.62||-3.65||5.45||27.37||-14.17||21.57||11.17|
3 Year Risk Metrics
|BUFIX vs Morningstar Global Markets ex-US Index (As of 6/30/21)|
Hypothetical Growth of $10,000
|(As of 6/30/21)|| |
|# of Holdings||85|
|Median Market Cap||$48.75 B|
|Weighted Average Market Cap||$103.09 B|
|3-Yr Annualized Turnover Ratio||12.87%|
Top 10 Holdings
|Name of Holding||Ticker||Country||Sector||% of Net|
|Taiwan Semiconductor||TSM||Taiwan, Province of China||Technology||2.80%|
|Sartorius Stedim Biotech||DIM||France||Health Care||2.49%|
|Eurofins Scientific||ERF||France||Health Care||2.09%|
|TOP 10 HOLDINGS TOTAL||23.85%|
Top 10 Countries
|COUNTRY||% of Portfolio|
|Taiwan, Province of China||2.80%|
|TOP 10 TOTAL||84.44%|
CAPITAL MARKET OVERVIEW
(As of 6/30/21) — Equity markets outside the U.S. advanced in the 2nd quarter, boosted by positive signs of economic recovery, such as accelerating vaccine roll-outs, increased manufacturing activity, and rising retail sales in some countries. Compared to the S&P 500, which returned 8.55%, the MSCI All-Country World ex-USA Index returned 5.48%, and the Morningstar Global Markets ex-US Index returned 5.64%.
Geographically, market performance was mixed around the world. Eurozone equities advanced strongly, supported by an increasing pace of vaccination and a strong corporate earnings season. Some countries were able to begin reducing restrictions as virus cases fell, and a rebound was seen in economic data, while inflation was kept in check. In the U.K., the equity markets performed well, though weakened in June as concerns around the rise in COVID-19 infections from the Delta variant took hold. In Asia, Japanese equities underperformed other developed markets, as the government delayed lifting the state of emergency, due to rising COVID infections. The Japanese economy was negatively affected by weak consumer spending and the semiconductor shortage. In emerging markets, the MSCI Emerging Markets Index rose 5% in U.S. dollar terms, driven by a very strong market in Brazil, where the vaccine rollout accelerated, and fiscal concerns eased. The Chinese market rose only modestly, as signs of moderating growth appeared and the government announced more regulations on technology and other industries.
(As of 6/30/21) — The Buffalo International Fund (BUFIX) produced a return of 8.97% for the 2nd quarter, outperforming the MSCI All-Country World Ex USA Growth Index in USD, which posted a return of 5.48%, and also the more broad Morningstar Global Markets ex-US Index, which posted a return of 5.49%. Compared to the Morningstar Index, outperformance was due mostly to stock selection, as allocation did not appear to be a highly significant factor.
Top contributors in the period included Ashtead Group Plc, Carl Zeiss AG, and Lonza Group AG.
Ashtead, an equipment rental company headquartered in the U.K., generates the majority of its revenue in the U.S. The stock continued its upward trend, driven by the reopening in the U.S., as well as positive trends in U.S. construction. The long-term outlook is underpinned by a secular trend toward outsourcing among construction companies and the expansion of equipment rental into other areas.
Carl Zeiss, a global manufacturer of ophthalmic diagnostics, therapeutics, and equipment, reported results in the quarter that showed a strong rebound in its core business. Carl Zeiss is especially benefiting from a strong position in South Korea and China, the largest refractory market in the world.
Finally, Lonza, a contract manufacturer for the biopharmaceutical industry, saw its stock rise dramatically post the surprise approval of the first disease-modifying drug for Alzheimer’s, which will bring increased demand for biologics manufacturing capacity, and suggests a more lenient FDA that could lead to more rapid approvals.
Top detractors in the quarter were Canadian National Railway, Munich Reinsurance, and Infineon Technologies AG.
Canadian National Railway’s stock price declined in the quarter after the company made a superior offer for Kansas City Southern Railroad (KSU), which caused a cancellation of its proposed merger with Canadian Pacific Railway. The stock has continued to underperform around merger-related issues and fear of increased regulation in the U.S. If the merger with KSU is successful, we believe it will present Canadian National with a number of opportunities for revenue growth above peers. Regardless of the outcome, however, we believe the long term story is attractive, as the company has continually strived and managed to drive efficiencies in its network.
Munich Reinsurance, one of the main global reinsurers, saw weak performance of its stock price in the quarter due to concerns around COVID-related claims, and pricing trends have not been as favorable as hoped thus far this year. We expect the medium term to be more positive in terms of premium growth, however.
Finally, Infineon AG, a semiconductor manufacturer, also saw its stock price decline, related to concerns over semiconductor shortages. The company’s sales are being constrained short term by capacity limits and supply chain issues, but longer term sales growth is underpinned by exposure to megatrends such as the increase in production of electric vehicles, internet of things, energy efficiency, and renewables.
(As of 6/30/21) — The outlook for the 2nd half of the year seems to be one of continued volatility. The ebbs and flows of COVID-19 infection rates around the world continue to impact markets, and we expect it to continue for the foreseeable future. Without a vaccination campaign that is truly global, we expect that it will be impossible to rule out potential new variants. We keep in mind, however, that for now, the best vaccines have proven to be effective at preventing severe disease, and this is preventing the overburdening of healthcare systems even when cases rise. Although restrictions may continue, most countries are learning to live with COVID-19 and keep their economies functioning.
Inflation concerns are also causing volatility in markets. While most countries outside the United States are not seeing the same magnitude of signs of inflation, and for now the signs seem to only be temporary, the longer term trend remains a global concern for markets. Most companies seem confident of their ability to pass on price increases, though if inflation does take hold, this will not be the case for all.
Around the world the pace of recovery has varied widely and generally has been linked to vaccination rates. In Europe the recovery is certainly underway and most company management teams are confident about the road ahead. Like in the U.S., the robustness of household savings bodes well for future consumption. In Japan the outlook is looking brighter after a lag in vaccination and expected improvements in supply chain bottlenecks. In emerging markets the outlook will depend not only on vaccination rates but also on the inflationary environment and exposure to commodities.
Throughout the ensuing volatility, our strategy will continue to be investing in high quality companies that have sound business models and secular growth drivers that should lead to growth for years to come. The companies we seek will be attractively-priced, financially-stable, well-managed companies with innovative strategies. We remain steadfast and believe this discipline should lead to superior risk-adjusted returns over the long term.
International Fund News
Kiplinger recognized the Buffalo Small Cap and Early Stage Growth Funds as “Top-Performing Mutual Funds” in their recent fund analysis.
Seven Buffalo Funds were named to Investor’s Business Daily Best Mutual Funds 2021 list, including the Best U.S. Diversified, Growth, Large Cap, Mid Cap, Small Cap, International, and U.S. Taxable Bond Fund categories.
BUFIX and BUFHX were named to the Investor’s Business Daily Best Mutual Funds 2020 list in the International Stock Fund and U.S. Taxable Bond Funds categories, respectively.
List of the “Top 20 Female Portfolio Managers in the U.S.” according to Citywire includes Buffalo Fund manager Nicole Kornitzer, one of only 7 women to be included in consecutive years.
- Kiplinger’s “Top Performing Mutual Funds” – August 18, 2021
- Investor’s Business Daily “Best Mutual Funds List” – March 22, 2021
- Investor’s Business Daily “Best Mutual Funds List” – March 23, 2020
- Citywire “Top 20 Female Portfolio Managers in the U.S.” – December 20, 2019
- Kiplinger Top-Performing Mutual Fund (5 Years) – November 15, 2019
- US News & World Reports – Best Mutual Funds – August 15, 2019
- Zacks “4 Non-U.S. Mutual Funds to Buy Now” – July 3, 2019
- Zacks “3 Non-U.S. Mutual Funds Worth Taking a Look” – May 3, 2019
- Morningstar 5-star Overall Rating – March 31, 2019 – out of 373 Foreign Large Growth funds*
- Morningstar 5-star Overall Rating – December 31, 2018 – out of 364 Foreign Large Growth funds*
- Zacks “Consider These Non-U.S. Mutual Funds for Excellent Returns” – October 25, 2018
- Morningstar 5-star Overall Rating – September 30, 2018 – out of 347 Foreign Large Growth funds*
- Citywire “Winning Women – Top 20 Female Portfolio Managers in the U.S.” – August 31, 2018
- Citywire “International Stars to Watch” – August 10, 2018
- Morningstar 5-star Overall Rating – September 30, 2017 – out of 325 Foreign Large Growth funds*
- Zacks “Four #1 Non-U.S. Mutual Funds” – September 22, 2017
- Citywire “Alpha Female 2017 – The Top Female Fund Managers in 7 Major Markets” – August 8, 2017
- Zacks “3 Strong Buy Non-U.S. Mutual Funds” – June 7, 2017
- Citywire Top 20 Female Portfolio Managers in the U.S. – December 7, 2016
*Overall Morningstar Rating derived from a weighted average of the fund’s 3-, 5-, and 10-year risk adjusted return.
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.
We construct our portfolios based on our own proprietary investment strategy.
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.
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