Ticker
  BUFEX

Inception Date
  May 19, 1995

Total Fund Assets
  $69.05 Million  (3/31/18)

Expense Ratio
  0.96%

Benchmark Index
  Russell 1000 Growth

MORNINGSTAR RATING

Overall Morningstar™ rating out of 1,269 Large Growth funds as of 5/31/18 (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

 

LowHigh

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 1,269 funds in the Large Growth category, as of 5/31/18.

Large Cap News
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Investment Strategy

The investment objective of the Buffalo Large Cap Fund is long-term growth of capital. The Large Cap Fund normally invests at least 80% of its net assets in equity securities, consisting of domestic common and preferred stocks of large capitalization (“large-cap”) companies — a company, at time of purchase by the Fund, with a market capitalization greater than or equal to the lesser of $10 billion or the median market capitalization of companies in the S&P 500 Index.

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We don’t manage to our benchmark so we don’t have too much concentration in any one single trend. We also manage based on valuation, trimming positions when they approach their potential upside and adding to them as they get closer to the potential downside.

~ Elizabeth Jones, Portfolio Manager

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Performance (%)

As of 5/31/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/19/95)
Buffalo Large Cap Fund1.504.7515.0112.0014.8410.309.399.69
  Russell 1000 Growth Index1.886.2321.0213.9315.6910.8910.339.33
  Lipper Large Cap Growth Fund Index2.117.9121.2212.7514.959.389.288.31
  Morningstar Large Growth1.986.7319.8211.4713.829.339.558.52
As of 3/31/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(5/19/95)
Buffalo Large Cap Fund0.170.1715.4110.4714.8310.3810.349.55
  Russell 1000 Growth Index1.421.4221.2512.9015.5311.3410.889.18
  Lipper Large Cap Growth Fund Index2.982.9823.1411.7014.779.829.808.15
  Morningstar Large Growth2.302.3020.4110.6413.819.8710.248.37
YearBuffalo Large Cap FundRussell 1000 Growth IndexMorningstar Large Growth Category
201724.8630.2127.67
20166.907.083.23
20157.155.673.60
201412.7613.0510.00
201332.7633.4833.92
201217.2315.2615.34
2011-5.602.64-2.46
201014.3216.7115.53
200950.7437.2135.68
2008-40.84-38.44-40.67
(As of 3/31/18)

vs Russell 1000 Growth Index
Upside Capture85.19
Downside Capture94.52
Alpha-0.87
Beta0.89
Sharpe Ratio0.97

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 3/31/18)

# of Holdings46
Median Market Cap$54.99 B
Weighted Average Market Cap$218.21 B
3-Yr Annualized Turnover Ratio47.78%
% of Holdings with Free Cash Flow82.61%
% of Holdings with No Net Debt28.26%
Active Share70.77%
Name of HoldingTickerSector% of Net Assets
Amazon.comAMZNConsumer Discretionary5.18%
MicrosoftMSFTTechnology4.73%
Alphabet (A)GOOGLTechnology4.13%
FacebookFBTechnology3.72%
AppleAAPLTechnology3.52%
SchlumbergerSLBEnergy3.04%
Alnylam PharmaceuticalsALNYHealth Care2.86%
PraxairPXMaterials2.69%
CME GroupCMEFinancials2.66%
VisaVFinancials2.61%
TOP 10 HOLDINGS TOTAL35.14%
View Full Holdings

As of 12/31/17. 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 3/31/18. 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 3/31/18. Market Cap percentages may not equal 100% due to rounding.

Commentary

Commentary for Q1 2018   (As of 3/31/18)

CAPITAL MARKET OVERVIEW

(As of 3/31/18) — The long streak of low volatility and positive stock market returns ended in the 1st quarter of 2018. Strong gains in January were erased in February and March, leaving the S&P 500 Index down 0.76% for the quarter. Volatility as measured by the Cboe Volatility Index (VIX) was up about 80% in the 1st quarter after falling for the last three years. Investor worries about increasing interest rates, possible trade wars, and threatened government action against large technology companies, offset generally strong economic data and corporate earnings growth.

The Russell 3000 Index declined 0.64% in the quarter, and, broadly speaking, small cap companies outperformed large cap companies during the period. The Russell Microcap Index advanced 0.68% and the Russell 2000 Index finished the period nearly flat, edging down just 0.08%. Moving up the market cap spectrum, performance worsened – the Russell Mid Cap Index was down 0.46% and the larger cap Russell 1000 Index declined 0.69%. Growth outperformed value by a wide margin during the quarter as the Russell 3000 Growth Index advanced 1.48% compared to a decline of 2.82% for the Russell 3000 Value Index. Technology and Consumer Discretionary were the best performing sectors, while Consumer Staples and Energy were the worst performing.

PERFORMANCE COMMENTARY

(As of 3/31/18) — For the 1st quarter of 2018, the Buffalo Large Cap Fund returned 0.17%, underperforming the Russell 1000 Growth Index which returned 1.42%. The Fund’s underperformance versus the benchmark was primarily driven by stock selection in our healthcare and information technology holdings. Sector allocation had limited impact on relative returns.

TOP CONTRIBUTORS
Top contributors in the period were Amazon, Red Hat, and CME Group.

Amazon’s top line beat expectations in the 4th quarter due to broad-based strength in eCommerce, AWS, advertising, and Prime. Adjusted operating margins also dramatically exceeded expectations leading to a high quality earnings report.

Red Hat has benefited from increasing cloud spend and digitalization. While Red Hat does not offer cloud solutions per se, the company’s products are a critical component of the hybrid cloud, which interfaces the public and private (on premise) cloud.

CME benefited from increased market volatility. CME’s products hedge exposure to various markets including interest rates, West Texas Intermediate (WTI) crude and equity indices. As market volatility increased, contract volumes rose in the first quarter with particular strength in interest rate hedging instruments where CME holds a dominant position.

TOP DETRACTORS
Top detractors in the period were Dentsply, Shire, and Biogen.

Dentsply manufactures and distributes dental products globally. A new CEO joined the organization in the 1st quarter of 2018. As a result of the changes in the executive suite, the 10-K filling was delayed two weeks, which pressured the stock.

Shire’s stock was hit by lackluster growth prospects for 2018 and concerns about increasing competition in several existing products.

Biogen sold off after the company announced changes to the clinical trial of a key late stage pipeline drug. The change to the trial does not impact the investment thesis. Nevertheless, some market participants’ confidence was shaken by the news.

OUTLOOK

(As of 3/31/18) — We ended the quarter with 46 stocks in the fund representing 45 companies as we hold both the Class A and C shares of Alphabet. We exited 7 stocks and added 7 more to the portfolio in the quarter. The cash position ending the period at about 3.9% of fund assets.

Over the past 6 months, earnings growth expectations for companies within the S&P 500 have accelerated, from a 10% growth rate to an 18% growth rate for 2018. As growth expectations have risen, so have concerns related to inflation and rising interest rates. In addition, speculation over business model disruptions at Facebook and Google have negatively impacted sentiment broadly in high growth stocks. Adding to this equation, rhetoric around trade wars modestly impacted business confidence year-to-date. These concerns have led to increased market volatility in the 1st calendar quarter of 2018. Specifically in February and March of 2018, U.S. equity markets gyrated up and down with no clear direction.

We remain optimistic that this business cycle has legs. We expect inflation to remain tame, interest rates to rise at a measured pace, and Facebook and Google to continue to generate strong growth despite increased regulation. We are also optimistic that the current posturing related to international trade and tariffs will give way to a reasonable compromise, an outcome that we believe is in the overall best interest of the disputing parties. As the dust settles on these concerns over the next several months, we expect U.S. equity markets to rise, driven by solid economic fundamentals.

In the meantime, the Buffalo Large Cap Fund is attempting to capitalize on the volatility, using the strength to trim or exit holdings in which we have modest expectations for risk adjusted returns, and using the pull backs to add to higher conviction stocks in which we believe will deliver superior risk-adjusted returns. We expect other market participants to also use the volatility to their advantage. Corporations are flush with cash, and we expect capital allocation in the form of merger and acquisition activity to increase in 2018.

The economic condition may ebb and flow, but our focus remains steadfast on investing in attractively-priced, financially strong, well-managed companies who are potential beneficiaries of the Buffalo Secular Growth Trends. We believe this discipline can lead to superior returns over the intermediate to long term.

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 Large Cap Fund received 3 stars among 1269 for the three-year, 3 stars among 1151 for the five-year, and 3 stars among 836 Large Growth funds for the ten-year period ending 5/31/18.

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.

©2018 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.