Quick Facts
Inception Date:4/16/20017/1/2019
Expense Ratio:1.02%0.87%
Total Net Assets:$1.80 Billion  (12/31/19)
Category:Mid Cap Growth
Benchmark:Morningstar U.S. Mid Growth
Related Material:
   Fund Fact Sheet Q4 2019
   PM Commentary Q3 2019
   Summary Prospectus
For a full transcript of this video, click here.
Innovation in Action

Portfolio Managers Clay Brethour and Dave Carlsen discuss how their focus on secular growth trends and innovation helps drive their investment strategy for the Buffalo Discovery Fund.

“Innovation in its most simple terms is change for the better. We look for companies that embrace change, think differently, think outside the box to create something new…”
  ~ Dave Carlsen, CFA, Co-Portfolio Manager

Morningstar Rating


Overall Morningstar Rating™ of BUFTX based on risk-adjusted returns among 565 Midcap Growth funds as of 12/31/19.

Investment Style

The investment objective of the Buffalo Discovery Fund is long-term growth of capital.

The Fund managers seek to identify companies expected to benefit from innovation and 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 engaged in innovative strategies are those who, in the Fund managers’ opinion, are engaged in the pursuit and practical application of knowledge to discover, develop, and commercialize products, services, or intellectual property.

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.

To us, innovation means to discover and transform new ideas into meaningful commercial value. The greater the economic impact and the longer the staying power, the better.

We seek under-appreciated stock opportunities in companies where thoughtful management teams are in a favorable position to use innovation for market advantage and sustained shareholder value creation.

Clay Brethour, CFA, Co-Portfolio Manager

Performance (%)

As of 12/31/193 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor4.3631.6331.6315.5611.4714.3010.899.70
BUFFALO DISCOVERY FUND - Institutional4.3931.8231.8215.7311.6314.4711.069.53
Morningstar U.S. Mid Growth Index8.3136.0136.0118.2911.8414.0410.278.36
Morningstar Mid-Cap Growth Category8.0532.3032.3015.429.9812.198.467.17
As of 12/31/193 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor4.3631.6331.6315.5611.4714.3010.899.70
BUFFALO DISCOVERY FUND - Institutional4.3931.8231.8215.7311.6314.4711.069.53
Morningstar U.S. Mid Growth Index8.3136.0136.0118.2911.8414.0410.278.36
Morningstar Mid-Cap Growth Category8.0532.3032.3015.429.9812.198.467.17
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
BUFTX vs Morningstar U.S. Mid Growth Index (As of 12/31/19)
Upside Capture84.08
Downside Capture93.71
Sharpe Ratio1.08
Hypothetical Growth of $10,000
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 Characteristics
(As of 12/31/19) 
# of Holdings90
Median Market Cap$15.52 B
Weighted Average Market Cap$19.44 B
3-Yr Annualized Turnover Ratio66.42%
% of Holdings with Free Cash Flow90.00%
Active Share64.39%
Top 10 Holdings
HoldingTickerSector% of Net
The Cooper Cos.COOHealth Care1.70%
MSCIMSCIFinancial Services1.66%
InsuletPODDHealth Care1.66%
Palo Alto NetworksPANWTechnology1.60%
NasdaqNDAQFinancial Services1.58%
ServiceMaster Global HoldingsSERVConsumer Discretionary1.58%
IDEXX LabsIDXXHealth Care1.51%
IHS MarkitINFOIndustrials1.50%
Kansas City SouthernKSUIndustrials1.47%
As of 9/30/19. 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.


Clay Brethour, CFA
Portfolio Manager

27 Years of Experience

 View full bio

Dave Carlsen, CFA
Portfolio Manager

27 Years of Experience

 View full bio



(As of 9/30/19) — The U.S. stock market continued to advance in the 3rd quarter, as expectations for accommodative monetary policy appeared to outweigh concerns of slowing economic growth. The S&P 500 Index returned 1.70% in the period, bringing the year-to-date return to 20.55% through quarter-end. Weak economic data led the Federal Reserve to cut interest rates twice in the quarter, driving rates lower and bond prices higher. U.S. markets outperformed international markets on the strength of the U.S. dollar.

The Russell 3000 Index gained 1.16% in the quarter. Value narrowly outperformed growth, with the Russell 3000 Value Index up 1.23% and the Russell 3000 Growth Index advancing 1.10%. Large caps generally outperformed small caps in the quarter. The Russell 1000 Index returned 1.42%, the Russell Midcap Index returned 0.48%, and the Russell 2000 Index posted a loss of 2.40%. Defensive sectors led the way in the period, with Utilities up 9.34%, Real Estate up 7.69%, and Consumer Staples up 6.12%. Energy was the worst performing sector with a total return of -6.61%. Health Care was also weak, returning -2.25% on increasing political concerns.


(As of 9/30/19) — The Buffalo Discovery Fund returned -0.74% during the quarter, outperforming the benchmark Morningstar U.S. Mid Growth Index return of -3.08%. Strong stock selection within the Information Technology and Consumer Discretionary sectors more than offset weak performance of the Fund’s Material sector holdings, as concerns of a slowing world economy weighed on cyclical stocks. During the quarter, the Fund was more conservatively-positioned compared to the benchmark. However, the Fund is starting to take advantage of recent weakness in cyclical sensitive stocks and finding opportunities at more reasonable valuations. Relative to the benchmark, the portfolio’s top three contributing sectors were Information Technology, Consumer Discretionary, and Energy. Materials and Consumer Staples were relative laggards.


Among the top contributors during the quarter were Insulet Corporation (PODD), Tyler Technologies (TYL), and KLA Tencor (KLAC).

Insulet is a medical device company that has developed an insulin infusion system (OmniPod) for people with insulin-dependent diabetes. The company reported a strong beat for 2nd quarter earnings, as adoption of unique wearable technology continues to accelerate. We believe the company continues to have a significant runway for growth.

Tyler Technologies, an integrator of technology and management solutions and services for public sector entities with a focus on local governments, saw its stock react positively after its 2nd quarter earnings report showed that its subscription offerings have passed critical mass and are now growing materially within the company’s revenue mix. Subscription software products (Software as a Service) give Tyler’s business model more attractive economics and predictability to its revenue stream. Given the need to modernize local governments’ legacy enterprise resource planning (ERP) systems, we believe that the company has a decade-long runway for 10% plus revenue growth.

KLA Corporation, a process control and yield management equipment provider to the semiconductor industry, guided to a stronger second half of 2019. This momentum should carry into 2020 as major customers pursue process technology transitions and begin implementing extreme ultraviolet (EUV) lithography that requires the advanced inspection tools developed by KLA Corp.


The biggest detractors in the period were Align Technology (ALGN) and Abiomed (ABMD).

Align, as it traditionally does, gave conservative guidance for the next quarter, but it was the 2nd quarter case numbers that had investors wondering if management’s guidance was conservative enough with perceived competitive pressures in the clear dental aligner marketplace. We believe that the long-term revenue outlook of 20-30% annually continues to be achievable, given the vastly under-penetrated global market for clear aligners. Nonetheless, with two new public companies gaining more visibility for their own clear aligner product offerings through their initial public offerings, the stock could have some volatility in the short-term, as investors take a wait-and-see approach on whether Align’s market leadership becomes challenged. We believe it will remain the market leader and preferred clear aligner choice.

Meanwhile, Abiomed’s stock declined, as the company reported a second consecutive quarter of slowing revenue growth. However, we continue to like the company’s long-term growth opportunity. It operates in an under-penetrated market that has high barriers to entry, but, nonetheless, we will be closely monitoring management’s execution to reinvigorating its growth trajectory.


(As of 9/30/19) — We expect the U.S.–China trade dispute will be resolved in some fashion within the next six months. While it appears that the global economy is slowing, we believe a trade deal could spur the bull market upward, particularly for cyclical stocks that have been delaying corporate investment decisions until there is a resolution. Additional factors, such as low inflation, accommodative monetary policies throughout the world, and low unemployment rates should continue to provide a healthy backdrop for corporate earnings growth.

Easy money for much of the past 10 years and rising expectations for more accommodative monetary policies have led to asset inflation and generally-elevated growth stock valuations. Expensive stocks continue to be littered throughout the market, which provides the potential to protect shareholders from capturing the extreme downside of any market correction through prudent active investment management. While we trimmed economically-sensitive cyclical positions earlier in the year, due to high valuations, we are selectively putting capital to work in the area as valuations have come down and uncertainty reduced with the prospect of a trade agreement.

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.


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Retirement Information
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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 Discovery Fund (BUFTX) received 3 stars among 565 for the 3-year, 4 stars among 501 for the 5-year, and 4 stars among 385 Mid-Cap Growth funds for the 10-year period ending 12/31/19.

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.