Quick Facts
Investor Institutional
Ticker: BUFEX BUIEX
Daily Pricing:  
As of 3/18/2024  
NAV: $48.23 $48.53
$ Change: $0.34 $0.34
% Change:
0.71% 0.71%
YTD:
11.18% 11.23%
Inception Date: 5/19/1995 7/1/2019
Expense Ratio: 0.95% 0.80%
Total Net Assets: $100.33 Million  (9/30/23)
Morningstar Category: Large Cap Growth
Benchmark Index: Russell 1000 Growth
Related Material:
   Fund Fact Sheet Q4 2023
   PM Commentary Q4 2023
Fund Objective & Investment Philosophy

The investment objective of the Buffalo Large Cap Fund is long-term growth of capital. The Fund normally invests in equity securities, consisting of common stocks, preferred stocks, convertible securities, warrants and rights of large capitalization (“large-cap”) companies. The Fund considers a company to be a large-cap company if, at time of purchase by the Fund, it has a market capitalization greater than or equal to the lesser of (1) $10 billion, or (2) the median market capitalization of the Russell 1000 Growth Index. The median market capitalization of the Russell 1000 Growth Index changes due to market conditions and also changes with the composition of the Index.

The Fund managers seek to identify companies for the Fund’s portfolio 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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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.

Ken Laudan, Portfolio Manager

Morningstar Ratings

       

Overall Morningstar Rating™ of BUFEX based on risk-adjusted returns among 1,115 Large Growth funds as of 2/29/24.

Performance (%)

As of 2/29/243 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO LARGE CAP FUND - Investor14.4810.5146.6511.5316.1613.9017.1210.2810.70
BUFFALO LARGE CAP FUND - Institutional14.5310.5746.8111.6816.3314.0717.3010.4510.86
  Russell 1000 Growth Index14.349.4945.9312.4918.7715.6618.3811.6510.84
  Lipper Large Cap Growth Fund Index16.0310.8947.659.1316.4213.7016.7610.399.62
As of 12/31/233 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO LARGE CAP FUND - Investor13.5440.3940.398.1116.3512.9615.409.9410.37
BUFFALO LARGE CAP FUND - Institutional13.5540.5240.528.2516.5213.1315.5610.1010.54
  Russell 1000 Growth Index14.1642.6842.688.8619.5014.8616.6811.2910.55
  Lipper Large Cap Growth Fund Index14.2342.0342.035.7116.9412.8915.039.959.28

2013201420152016201720182019202020212022
BUFFALO LARGE CAP FUND - Investor32.7612.767.156.9024.86-1.6331.7728.0826.08-28.61
BUFFALO LARGE CAP FUND - Institutional32.9612.927.317.0625.05-1.4831.9828.2826.27-28.51
  Russell 1000 Growth Index33.4813.055.677.0830.21-1.5136.3938.4927.60-29.14
  Morningstar U.S. Large Growth Index32.4614.387.711.7931.152.9433.8138.8621.47-40.36
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
BUFEX vs Russell 1000 Growth Index (As of 12/31/23)
Upside Capture84.83
Downside Capture92.65
Alpha-0.05
Beta0.91
Sharpe Ratio-0.03
Hypothetical Growth of $10,000
This chart illustrates the performance of a hypothetical $10,000 investment made in the Fund on the Fund’s inception date. Assumes reinvestment of dividends and capital gains. This chart does not imply future performance.

Portfolio

Portfolio Characteristics
(As of 12/31/23) 
 
# of Holdings84
Median Market Cap$105.88 B
Weighted Average Market Cap$952.90 B
3-Yr Annualized Turnover Ratio51.15%
% of Holdings with Free Cash Flow91.67%
Active Share39.42%
Top 10 Holdings
Name of HoldingTickerSector% of Net
Assets
Microsoft CorporationMSFTInformation Technology10.64
Apple Inc.AAPLInformation Technology8.93
Amazon.com, Inc.AMZNConsumer Discretionary6.00
Alphabet Inc. Class AGOOGLCommunication Services5.99
NVIDIA CorporationNVDAInformation Technology4.55
Meta Platforms Inc. Class AMETACommunication Services2.70
Visa Inc. Class AVFinancials2.55
Costco Wholesale CorporationCOSTConsumer Staples1.90
UnitedHealth Group IncorporatedUNHHealth Care1.62
Eli Lilly and CompanyLLYHealth Care1.43
TOP 10 HOLDINGS TOTAL46.32%
As of 9/30/23. 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 12/31/23. 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 12/31/23. Market Cap percentages may not equal 100% due to rounding.

Management

Ken Laudan
Portfolio Manager

30 Years of Experience

 View full bio

Commentary

PERFORMANCE COMMENTARY

(As of 12/31/23)

The Buffalo Large Cap Fund produced a return of 13.54% in the quarter versus the
Russell 1000 Growth Index return of 14.16%. As mentioned above, the broad large
cap market S&P 500 Index advanced 11.69%. While the portfolio performed well on an
absolute return basis, the slight benchmark relative underperformance was due to cash
drag during the rapid market advance, a decline in the energy company Schlumberger
(SLB) and from the pharmaceutical company Sanofi (SNY). Shares of Schlumberger
dropped by more than 10%, and shares of Sanofi fell by a little more than 7%.
For calendar year 2023, the Buffalo Large Cap Fund produced a total return of 40.39%
versus the Russell 1000 Growth Index gain of 42.68% and 26.29% for the S&P 500
Index. It’s worth noting once again that the fund remained underweight to many
of the Russell 1000 Growth’s high growth, high volatility constituents such as Tesla,
which advanced about +105% in 2023. The fund also remains capped on individual
position weightings for Apple (AAPL) and Alphabet (GOOGL) owing to SEC requirements
regarding diversified investment funds. Apple finished the year representing 12% of the
Russell 1000 Growth Index weight and Alphabet represented 6.5% of the index weight.
Shares of Alphabet climbed 48% in 2023 and Apple advanced more than 58%.

Top Contributors
Top contributors to fund results for the quarter were Microsoft, Amazon, and Apple.
Microsoft rebounded strongly from relative underperformance in the previous quarter
and posted a return of more than 19%. Share price appreciation was driven by
better-than-expected quarterly results as revenue growth of 12% materially exceeded
expectations of 8%. Furthermore, forward guidance was raised primarily due to Azure
(public cloud) growth that is expected to accelerate sequentially owing to increased
demand from large enterprise customers including some AI related workloads…a
key metric investors are watching as we go forward in 2024. Microsoft remained
well-positioned as one of the top long term generative AI beneficiaries. The company
is now launching their gen AI feature with Office 365 (O365 cloud version) to over 200
million monthly active users at a price point of $30 per user per month. This launch will
be watched with some interest by the investment community to get a sense for what
sort of initial interest will be shown by enterprises engaging with AI tools.

A big driver for shares of Amazon’s stock in the most recent quarter (+19.5%) was
the strong financial performance and margin expansion within the core eCommerce
(internet retail) business for Amazon. Financial performance within eComm had
deteriorated materially over the last three years (post Covid) as the company spent
nearly $100 billion building out its delivery and logistics network to facilitate a broad
next-day/same-day delivery service. The company has finally started to grow into this
massive building and logistics expansion and should continue to show strong sequential
improvement in operating margins that could exceed 11% by 2027, more than double
the pre-Covid operating margins of 5%. Moreover, Amazon possesses one of the
highest earnings per share (EPS) growth rates of all the mega cap companies, nearing
30% a year through 2027.

Shares of Apple gained 12.6% in the fourth quarter and the company remained an
important and large weighting of the Buffalo Large Cap Fund at 9% of total assets.
Notwithstanding the large absolute position in Apple, the portfolio is still well below the
benchmark weighting of 12%. While there remain concerns surrounding iPhone sales in
China, and other markets globally, several investment research reports published in the
fourth quarter speculated that Apple may be a stealth AI beneficiary by enabling AI “at the
edge”. At the edge refers to using AI models to generate content directly on your lap top
computer or iPhone (via high powered processing chips in the devices) avoiding the need
to access the cloud for AI workloads. Think about Apple having an AI specific app store
where one can download powerful new applications that provide potentially more privacy
and security than accessing AI tools and apps via a public cloud vendor such as Amazon
or Microsoft. This AI at the edge epiphany, seemed to generate renewed enthusiasm for
Apple’s shares in the period.

Top Detractors
Top detractors from fund results in the quarter were Schlumberger, Sanofi, and
Aon. Schlumberger declined by more than 10% owing to across-the-board weakness
in commodities and oil specifically. The company is a key beneficiary of increased
exploration and production as the world has had a decade of under-investment in oil
and gas. Moreover, the Russian invasion into Ukraine shifted the focus from energy
transition to energy security…a trend unlikely to reverse over the long term.
We continue to like Schlumberger for three primary reasons:

1. Key products for include drill bits, drilling fluids, well construction equipment, wireline
testing (computer on stick) used for sampling quality of reservoirs or quality of the
wells and a whole array of sub-sea and sub-surface products such as well heads,
fluid injection systems and communication equipment.

2. The company also benefits from its growing technological and cloud-based digital
offerings that energy producers are demanding to help drive increased efficiency
and productivity while providing a more efficient climate impact. Higher margins
(38%) by provided by workflow automation, new decision driven insights from its proprietary data of seismic and geological interpretation of reservoirs, which is a $6 billion business or 21% of total annual revenues.

3. The company has a great balance sheet, industry leading margins (26% EBITDA), a
dominant market position, with a thrust to a greener footprint, which all coalesce to
make Schlumberger an interesting investment opportunity, in our view.

Sanofi (SNY) declined more than 7% owing to increased investment spend in research
and development (R&D) to accelerate their business model transformation to one
focusing more on novel biologic molecules. This increased R&D lowered the projected
earnings growth for 2024. We expect the company’s reset earnings growth rate of 8%
coupled with a dividend yield of nearly 3% to commence in 2025. We continue to like
the company longer term given its’ ongoing shift to more durable and differentiated
biologic compounds such as Beyfortus, a novel vaccine for RSV, and Altuvilo, a new
treatment for hemophilia Factor VIII. We believe that both compounds have multi-billion
drug revenue potential. We also see a growing runway for the company’s leading drug,
Dupixent given positive data for use in COPF, which is a large new market opportunity
for this best-in-class franchise.

Finally, shares of Aon pulled back by 10% in the period despite quarterly revenue
and EPS exceeding expectations with no change in the guidance parameters. There
were, however, some mixed results below the headline numbers such as slower than
expected growth within the key commercial risk segment that came in 100 basis points
below the 5% growth expectation, well below what peers are generating. The company
also announced a large acquisition of NFP, a privately held but leading middle market
property and casualty insurance broker. The middle market is where AON had a
product offering gap and NFP should help close that. NFP does provide some potential
integration and execution risk and the transaction will not be accretive until 2027,
so the acquisition represents a bit of balanced risk/reward for AON. Consequently,
we continued to reduce our investment weight in the company despite believing it is
attractively positioned longer term.

OUTLOOK

(As of 12/31/23)

As always, our goal in managing the fund is to produce better than benchmark riskadjusted returns while also generating more consistent, less volatile returns over the
long term. We appreciate your continued confidence in our investment strategy and
approach. It’s one that has historically demonstrated an attractive track record of growth
through various market challenges and 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. Earnings growth is not representative of the fund’s future performance.

Literature

Buffalo Large Cap Fund
Documents
Last
Updated
  Fact Sheet12/31/23
  Quarterly Commentary12/31/23
  Full Fund Holdings6/30/23
  Prospectus7/28/23
  Statement of Additional Information7/28/23
  Annual Report3/31/23
  Semi-Annual Report9/30/22
  Tax Guide - 20231/8/24
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.

Morningstar Rating™

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 Morningstar Rating does not include any adjustment for sales loads. 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.

©2022 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 Buffalo Large Cap Fund received 4 stars among 1,115 for the 3-year, 4 stars among 1,040 for the 5-year, and 4 stars among 811 Large Growth funds for the 10-year period ending 2/29/24. Other share classes may have different performance characteristics.