Inception Date
  April 16, 2001

Total Fund Assets
  $1.90 Billion  (3/31/18)

Expense Ratio

Benchmark Index
  Russell Midcap Growth


Overall Morningstar Rating™ out of 549 Midcap Growth funds as of 3/31/18 (derived from a weighted average of the fund’s 3-, 5-, and 10-year risk adjusted return measure).


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.




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 549 funds in the Mid-Cap Growth category, as of 3/31/18.


Discovery Fund Webcast – September 2017

During this webcast, we covered:
• How innovative companies can lead to above average growth
• Key objectives of the Fund and their impact on current performance
• Our proprietary portfolio management process
• Fund performance YTD


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

~ Dave Carlsen, Portfolio Manager


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The investment objective of the Buffalo Discovery Fund is long-term growth of capital. The Fund primarily invests in equity securities, consisting of domestic common stock, preferred stock, and convertible securities, which may increase in value due to the development, advancement, or commercial application of innovative strategies.

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.

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 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.

IBD Best Mutual Funds 2018

Investor’s Business Daily recently named the Buffalo Discovery Fund the #3 Midcap fund on the IBD Best Mutual Funds 2018 list.

The list recognizes funds that have outperformed the broad market over the past 1, 3, 5, and 10-year periods, as of 12/31/17, and have at least $100 million in assets — only 16 midcap funds made the list.


Performance (%)

As of 3/31/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Discovery Fund1.241.2417.359.6214.5513.4414.409.30
  Russell Midcap Growth Index2.172.1719.749.1713.3110.6112.128.77
  Morningstar Mid-Cap Growth2.152.1518.348.2811.949.3911.026.77
As of 3/31/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Discovery Fund1.241.2417.359.6214.5513.4414.409.30
  Russell Midcap Growth Index2.172.1719.749.1713.3110.6112.128.77
  Morningstar Mid-Cap Growth2.152.1518.348.2811.949.3911.026.77
YearBuffalo DiscoveryRussell Midcap Growth IndexMorningstar Mid-Cap Growth Category
(As of 3/31/18)

vs Russell Midcap Growth Index
Upside Capture93.14
Downside Capture86.38
Sharpe Ratio0.92

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.


(As of 3/31/18)

# of Holdings86
Median Market Cap$13.84 B
Weighted Average Market Cap$46.45 B
3-Yr Annualized Turnover Ratio50.60%
% of Holdings with Free Cash Flow88.24%
% of Holdings with No Net Debt37.65%
Active Share80.86%
HoldingTickerSector% of Net Assets
Align TechnologyALGNHealth Care2.09%
MSCIMSCIFinancial Services1.81%
Verisk AnalyticsVRSKIndustrials1.68%
Intercontinental ExchangeICEFinancial Services1.66%
MasterCardMAFinancial Services1.64%
DanaherDHRHealth Care1.64%
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 for Q1 2018   (As of 3/31/18)


(As of 12/31/17) — Equity markets ended 2017 on a strong note. The 4th quarter saw a continuation of trends that have influenced the market all year. Investor optimism about improving global economic growth and strong corporate earnings led to another quarter of higher stock prices and low volatility. Strong holiday sales and the passage of tax reform legislation also provided tailwinds to equity markets during the period. The Chicago Board of Options Exchange Volatility (CBOE) Index continued to hover near record lows, and, for the first time since 1958, the S&P 500 Index delivered positive returns in every single month of the year.

The Russell 3000 Index produced a total return of 6.34% in the 4th quarter. Growth continued to outperform value, as the Russell 3000 Growth Index advanced 7.61% and outperformed the Russell 3000 Value Index return of 5.08%. Large companies generally outperformed smaller companies during the quarter. The Russell 1000 Index returned 6.59%, the Russell Midcap Index returned 6.07%, the Russell 2000 Index returned 3.34%, and the Russell Microcap Index returned 1.80%. Consumer discretionary and technology were the best performing sectors while utilities, health care, and consumer staples underperformed in the quarter.


(As of 12/31/17) — The Buffalo Discovery Fund gained 4.44% during the quarter, underperforming the benchmark Russell Midcap Growth Index, which advanced 6.81%. Gains were widespread within the index with all sectors producing positive returns, as tax reform and better global growth broadly lifted markets.

The fund outperformed in Technology, Materials and Consumer Staples, mainly through positive stock selection. However, it failed to keep up with the strong returns posted by the Consumer Discretionary, Industrials, Energy and Financials sectors where the factor most influential to returns was the degree to which tax cuts would benefit future earnings per share.

Additionally, our overweight in Healthcare was a headwind as that sector underperformed the Index and experienced adverse stock selection. In spite of the relative underperformance during the quarter, the Fund outperformed its benchmark for the calendar year 2017.

Align Technology the maker of clear aligners for dental malocclusion and a long term holding in the fund, continued to grow in excess of expectations. We believe robust growth is sustainable over the intermediate to long term as less than 10% of the orthodontic market has converted from metal braces to clear aligners.

Akamai Technologies surged on news Wall Street activist Elliott Management announced they’ve built a position in the stock and intend to advocate for positive operational and strategic change in the interest of shareholders. We believe Akamai’s globally distributed network presence with servers and software embedded at data centers and network interconnect sites around the world is a unique asset that is well suited to serve and protect global media content and cloud based applications.

Nevro makes high frequency spinal cord stimulation (SCS) devices that treat back and leg pain more effectively than competing low frequency SCS devices. As a result it has rapidly gained nearly 15% market share and remains well positioned for further gains. It stumbled in the quarter as its share gains and sales force productivity did not keep up with high expectations.

Evolent Health offers software tools and services to healthcare providers to manage populations of patients, with a goal of decreasing the cost of care, while maintaining or improving the quality of care. Market uncertainty related to the repeal of the Affordable Care Act has left many providers cautious on executing new contracts. Consequently, investors were concerned about the company’s near-term growth prospects, leading to a sell-off in the stock. We remain optimistic that the strong management team will navigate the near-term uncertainty with the long-term opportunity intact.


(As of 12/31/17) — The market environment for equities remains favorable in our view. Interest rates, inflation and unemployment remain low while corporate earnings grind higher buoyed by broadening global growth and recent U.S. corporate tax reform. Growing cash flows combined with foreign cash repatriation should drive improved business investment and more aggressive capital allocation activity including merger and acquisition (M&A), buybacks and dividend increases. In our opinion, the fund holds many high quality smaller and mid cap growth companies that could make very promising acquisition candidates if M&A activity does indeed pick up.

As growth strengthens, inflation expectations and the pace at which the Fed intends to normalize interest rates and the central bank balance sheet could introduce market volatility. We stand poised to capitalize when and where we see an opportunity to improve risk-adjusted expected returns within the portfolio.

Economic conditions may ebb and flow, but our focus remains steadfast on investing in attractively priced, financially strong, well-managed companies whose innovative strategies should fuel secular growth opportunities. We seek those opportunities where thoughtful management teams are in a favorable position to use innovation for market advantage and sustained value creation. Successful innovation may often lead to disruptive share gains in large existing markets, or the creation of large new market opportunities, a strategy which we believe is less dependent on the overall macro environment for growth.

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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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 received 4 stars among 549 for the three-year, 5 stars among 485 for the five-year, and 5 stars among 352 Mid-Cap Growth funds for the ten-year period ending 3/31/18.

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.

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.

While the U.S. News Mutual Fund Score combines all five equally weighted category scores to achieve its weighting, Lipper intends its measures to be used as individual assessments of a fund’s ability to meet specific goals, rather than as a cumulative measure of fund quality. Lipper rankings are comprised of five unique measures (Total Return, Consistent Return, Preservation, Expense, and Tax Efficiency), each with a 1-to-5 score, ranking each fund against its peers. The highest 20% of funds in each peer group are named Lipper Leaders, the next 20% receive a rating of 4, the middle 20% are rated 3, the next 20% are rated 2, and the lowest 20% are rated 1. The overall calculation is based on an equal-weighted average of percentile ranks for each measure over three-, five-, and ten-year periods (if applicable). Lipper Ratings for Total Return reflect funds’ historical total return performance relative to peers. Lipper Ratings for Consistent Return reflect funds’ historical risk-adjusted returns, relative to peers. Lipper Ratings for Preservation reflect funds’ historical loss avoidance relative to other funds within the same asset class. Lipper Ratings for Tax Efficiency reflect funds’ historical success in postponing taxable distributions relative to peers. Lipper Ratings for Expense reflect funds’ expense minimization relative to peers with similar load structures.

The Zacks Mutual Fund Rank ranks funds on a scale from 1 to 5, with 1 being a Strong Buy and 5 being a Strong Sell. Each quarter, Zacks updates their Mutual Fund Rank by evaluating the average Zacks Rank for the stocks owned by the fund and blending this with other criteria their studies show is beneficial in finding funds that will outperform in the future. In general, the higher the average Zacks Rank for the stocks in the fund, then the higher the Zacks Mutual Fund Rank.

TheStreet.com Ratings Investment Ratings for Funds condense the available fund performance and risk data into a single composite opinion of each fund’s risk-adjusted performance. “A (Buy) Excellent” rating means the fund has an excellent track record of maximizing performance while minimizing risk, thus delivering the best possible combination of total return on investment and reduced volatility. “B (Buy) Good” rating means the fund has a good track record of balancing performance with risk. “C (Hold) Fair” rating ratings means the fund has a track record which is about average. “D (Sell) Weak” rating means the fund has underperformed the universe of other funds given the level of risk in its underlying investments, resulting in a weak risk-adjusted performance. “E (Sell) Very Weak” rating means the fund has significantly underperformed most other funds given the level of risk in its underlying investments, resulting in a very weak risk-adjusted performance. The plus sign (+) is an indication that the fund is in the top third of its letter grade. The minus sign (-) is an indication that the fund is in the bottom third of its letter grade. “U Unrated” rating means the fund does not have sufficient history to make a reliable assessment of its risk-adjusted performance.

The CFRA Rankings range from five-star (highest) to one-star (lowest) and follow a normalized distribution curve, based upon the fund’s rank in its Category. Top 10% receive five stars, next 20% receive four stars, middle 40% receive three stars, next 20% receive two stars, and the bottom 10% receive one star. Rankings are refreshed on a weekly basis to incorporate the latest inputs from the holdings-based analysis and the latest relative performance review.