Quick Facts
Investor Institutional
Daily Pricing:  
As of 2/7/2023  
NAV: $21.77 $21.92
$ Change: $0.35 $0.35
% Change:
1.63% 1.62%
12.80% 12.82%
Inception Date: 4/16/2001 7/1/2019
Expense Ratio: 1.00% 0.86%
Total Net Assets: $882.20 Million  (12/31/22)
Morningstar Category: Mid Cap Growth
Benchmark Index: Russell Midcap Growth
Related Material:
   Fund Fact Sheet Q4 2022
   PM Commentary Q4 2022
   Summary Prospectus

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.

Dave Carlsen, CFA, Co-Portfolio Manager

Morningstar Ratings


Overall Morningstar Rating™ of BUFTX based on risk-adjusted returns among 534 Midcap Growth funds as of 12/31/22.

Morningstar Sustainability Rating™ of BUFTX out of 1,580 U.S. Equity Mid Cap funds as of 11/30/22, based on 99% of AUM

Carbon Metric Rating of BUFTX as of 9/30/22 in the Mid Cap Growth category, based on 96% of AUM; long positions only


Historical Sustainability Score Rank of BUFTX

Performance (%)

As of 1/31/233 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO DISCOVERY FUND - Investor9.0110.16-10.605.136.5011.2210.9512.688.94
BUFFALO DISCOVERY FUND - Institutional9.0510.19-10.475.316.6611.3911.1212.849.10
  Russell Midcap Growth Index7.768.73-8.526.468.2611.679.8311.388.89
  Morningstar U.S. Mid Growth Index9.849.75-
  Morningstar Mid-Cap Growth Category6.678.63-10.976.507.7210.899.0110.487.07
As of 12/31/223 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO DISCOVERY FUND - Investor6.09-28.67-28.672.225.6110.769.4811.908.49
BUFFALO DISCOVERY FUND - Institutional6.11-28.57-28.572.375.7710.939.6412.078.65
  Russell Midcap Growth Index6.90-26.72-26.723.857.6411.418.6110.868.51
  Morningstar U.S. Mid Growth Index4.84-32.37-32.374.368.4011.348.12--
  Morningstar Mid-Cap Growth Category5.07-27.79-27.794.147.0910.677.819.966.69

BUFFALO DISCOVERY FUND - Investor36.6110.685.645.5625.44-6.5431.6333.8111.90-28.67
BUFFALO DISCOVERY FUND - Institutional36.8210.855.805.7225.62-6.4031.8234.0312.07-28.57
  Russell Midcap Growth Index35.7411.90-0.207.3325.27-4.7535.4735.5912.73-26.72
  Morningstar U.S. Mid Growth Index34.079.77-0.716.4625.67-3.1636.0146.1714.97-32.37
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 Russell Midcap Growth Index (As of 12/31/22)
Upside Capture88.47
Downside Capture98.02
Sharpe Ratio0.06
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 12/31/22) 
# of Holdings82
Median Market Cap$14.22 B
Weighted Average Market Cap$23.44 B
3-Yr Annualized Turnover Ratio62.10%
% of Holdings with Free Cash Flow81.48%
Active Share78.43%
Top 10 Holdings
HoldingTickerSector% of Net
HealthEquityHQYHealth Care2.10%
CoStar GroupCSGPReal Estate1.94%
Martin Marietta MaterialsMLMMaterials1.92%
Keysight TechnologiesKEYSTechnology1.89%
NateraNTRAHealth Care1.84%
CopartCPRTConsumer Discretionary1.75%
As of 9/30/22. 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 12/31/22. 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 12/31/22. Market Cap percentages may not equal 100% due to rounding.


Dave Carlsen, CFA
Portfolio Manager

31 Years of Experience

 View full bio

Jamie Cuellar, CFA
Portfolio Manager

31 Years of Experience

 View full bio



(As of 12/31/22) — Capital markets rallied modestly in the 4th quarter as the S&P 500 Index gained 7.56%, the only positive quarter for 2022. Cooler inflation readings, resilient consumer spending, and better-than-expected corporate earnings buoyed markets during the first two months of the 4th quarter before pulling back in December. Much of the focus remains on the path of future interest rates, recession fears, and the economic and market impact those events may generate in 2023.

Despite the 4th quarter advance, the stock market recorded its worst calendar year since 2008, with a decline of -18.11% for the S&P 500 Index, and a loss of -32.54% for the growth-oriented and technology-heavy Nasdaq Composite Index. Large cap technology stocks and the more interest-rate sensitive assets suffered the most, while value stocks outperformed. In the end, nine of the S&P 500 Index’s 11 economic sectors declined. Energy stocks were the bright spot, recording a gain of 65.72% for the sector while Utilities eked out a gain of 1.57% in 2022.

The damage wasn’t isolated to the stock market as the investment-grade bond indices suffered double-digit losses for the year as well. In fact, a traditional balanced investment portfolio of 60% stocks and 40% bonds suffered the 4th worst drawdown in the past 100 years.

Recapping quarterly results, the broad-based Russell 3000 Index advanced 7.18% in the period. Value stocks significantly outperformed growth stocks to close out 2022, as the Russell 3000 Value Index returned 12.18% versus a return of just 2.31% for the Russell 3000 Growth Index. Relative performance was mixed going down in market cap size as small caps advanced less than large caps in the quarter, while mid cap stocks outperformed both large and small caps. Larger cap stocks returned 7.24%, as measured by the Russell 1000 Index, compared to the smaller cap Russell 2000 Index return of 6.23%, while the Russell Midcap Index produced a return of 9.18% in the quarter.


(As of 12/31/22) — The Buffalo Discovery Fund (BUFTX) produced a return of 6.09% for the quarter versus a 6.90% increase for the Russell Midcap Growth Index. Outperformance in the Industrials, Materials, and Health Care sectors was offset by underperformance in Financials and Technology. In sum, our focus on innovation was a broad headwind in 2022 with the Information Technology, Communication Services, and Health Care sectors represented three of the four worst performing sectors within the benchmark. Meanwhile Energy, Utilities, and Consumer Staples, where the secular growth outlook is lacking or where innovation is often tough to justify, were the three best performing sectors.

Our focus on high-quality and well-funded companies led to a positive stock selection effect, but the allocation to innovative companies was out of favor and too difficult to overcome. Additionally, shares of smaller companies – those with market capitalizations of $5.5 billion or less – failed to keep up with their larger brethren, and this is an area where we are also overweight relative to our benchmark. Following the worst performance for equities in more than a decade and growing concerns about recession in 2023, we believe investors sought refuge in the larger index positions within the benchmark. End-of-year volatility spiked associated with sizable tax-loss selling impacting smaller companies and the Technology, Health Care, and Communications Services sector disproportionately.

The 4th quarter was the only quarter of 2022 where equity markets had positive returns, and the broader markets continue to be driven by the interest rate cycle and Federal Reserve (the “Fed”) efforts to tame inflation. The 10-year Treasury yield moved up just eight basis points in the quarter, putting the benchmark yield at 3.88%. That compares to a cumulative increase of 230 basis points through the first three quarters of the year. Cooler readings on inflation suggest the Fed’s interest rate hikes are having their intended impact on demand, and we suspect that future rate hikes will be more modest in size. Regardless of Fed policy, we remain focused on our mission to invest in innovative growth companies while maintaining a consistent discipline around valuation and risk.


Horizon Therapeutics (HZNP) was the largest contributor to performance during the quarter. Horizon is a biotech company focused on the development and commercialization of medicines used in the treatment of rare autoimmune diseases. The company received an all-cash offer to be acquired by Amgen for $116.50/share on December 12. That is more than a 50% premium to where the shares traded just a month prior to the announcement. We do not anticipate other offers and recently sold our position.

Schlumberger (SLB) was another positive contributor for the quarter. Schlumberger is an oilfield services company that provides technology for reservoir characterization, drilling, production, and processing. The company generates attractive returns on capital and has a strong competitive position. We purchased the stock in the previous quarter, believing investors did not fully appreciate their growing digital assets and the need for the industry to invest in new production. While the stock has done well, estimates are likely to move even higher as the oil and gas industry stands to benefit from China reopening, Europe’s ban on Russian gas, and the U.S. government ultimately needing to refill the Strategic Petroleum Reserve.


Varonis Systems (VRNS) was the top detractor for the quarter. The company sells security solutions that allow enterprises to analyze data and user behavior to protect against breaches and cyberattacks. The company substantially reduced its guidance for revenue growth during the quarter owing to macro-related weakness in Europe, an elongating sales cycle, and foreign exchange headwinds. Further complicating the revenue outlook was the announcement of a subscription-based model, as the transition to this model could weigh on revenue growth for several years. We were surprised and disappointed by the magnitude of the guidance revision and subsequently eliminated our position.

DoubleVerify (DV) was also a detractor during the quarter. The company is a leading software platform for digital media measurement and analytics. Shares traded lower as investors grew increasingly concerned about advertising spending against the backdrop of a weakening consumer and tighter corporate budgets. For its part, the company reported strong quarterly results with revenues growing 26% and operating margins improving year-over-year. We recognize there are cyclical headwinds, but DoubleVerify appears well positioned to continue to gain share in digital advertising, and we believe the stock is attractively valued.


(As of 12/31/22) — 2022 is officially in the rear-view mirror, and for that investors can be thankful. Over the past year, markets have been forced to reckon with inflation, an aggressive Fed tightening cycle, war in Ukraine, supply chain disruption, the lapping of trillions of dollars in stimulus payments, and a sharply higher U.S. dollar. We believe most investors would agree that the Fed put too much stimulus into the system and the inflationary hangover proved more than a little transitory.

The good news is that inflation appears to be moderating, even with the economy at full employment. We have seen prices peak for gasoline, ocean freight, used cars, and various commodities. Growth in home prices and rents has slowed. The dollar has weakened. Small business hiring plans are waning. The Fed’s work might not be complete, but they have done a lot and it appears to be working.

The bad news is that Fed policy works with a lag, and we have yet to feel the full impact of the tightening cycle. Consumers spending in 2022 was propped up by a historically low savings rate, and the Fed needs to keep rates higher for longer if it really wants to stomp out inflation. If this plays out, it will weigh on consumer spending and economic growth, and it could lead to job losses and recession. The backdrop remains uncertain as companies look to budget for hiring and capital spending into the new year.

All of this seems well anticipated by the markets and corporations with long term risk/reward much improved vs one year ago. During the 4th quarter, we stepped in and invested in some of our favorite companies knowing full well that 2023 could be a challenging operating environment. Time is a competitive advantage for long-term investors, and our strategy is to take a multi-year, risk-aware view and build positions in great innovative companies as the risk/reward compels. We remain focused on dominant companies with strong balance sheets generating attractive returns on capital investment. We believe investing in innovative, well-managed companies with durable competitive advantages trading at attractive valuations will continue to generate outsized multiyear returns. Thank you for your continued trust and support.

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.

7 Buffalo Funds Named to IBD Best Mutual Funds 2021 List

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.


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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.

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 Discovery Fund (BUFTX) received 3 stars among 534 for the 3-year, 3 stars among 499 for the 5-year, and 3 stars among 389 Mid-Cap Growth funds for the 10-year period ending 12/31/22. Other share classes may have different performance characteristics.
Morningstar Sustainability Rating™

The Morningstar Sustainability Rating™ is intended to measure how well the issuing companies of the securities within a fund’s portfolio holdings are managing their financially material environmental, social and governance, or ESG, risks relative to the fund’s Morningstar Global Category peers. The Morningstar Sustainability Rating calculation is a five -step process. First, each fund with at least 67% of assets covered by a company-level ESG Risk Score from Sustainalytics receives a Morningstar Portfolio Sustainability Score. The Morningstar Portfolio Sustainability Score is an asset weighted average of company-level ESG Risk Scores. The Portfolio Sustainability Score ranges between 0 to 100, with a higher score indicating that a fund has, on average, more of its assets invested in companies with high ESG Risk. Second, the Historical Sustainability Score is an exponential weighted moving average of the Portfolio Sustainability Scores over the past 12 months. The process rescales the current Portfolio Sustainability Score to reflect the consistency of the scores. The Historical Sustainability Score ranges between 0 to 100, with a higher score indicating that a fund has, on average, more of its assets invested in companies with high ESG Risk, on a consistent historical basis. Third, the Morningstar Sustainability Rating is then assigned to all scored funds within Morningstar Global Categories in which at least thirty (30) funds receive a Historical Sustainability Score and is determined by each fund’s Morningstar Sustainability Rating Score rank within the following distribution: High (highest 10%), Above Average (next 22.5%), Average (next 35%), Below Average (next 22.5%), and Low (lowest 10%). Fourth, Morningstar applies a 1% rating buffer from the previous month to increase rating stability. This means a fund must move 1% beyond the rating breakpoint to change ratings. Fifth, they adjust downward positive Sustainability Ratings to funds with high ESG Risk scores. The logic is as follows: If Portfolio Sustainability score is above 40, then the fund receives a Low Sustainability Rating. If Portfolio Sustainability score is above 35 and preliminary rating is Average or better, then the fund is downgraded to Below Average. If the Portfolio Sustainability score is above 30 and preliminary rating is Above Average, then the fund is downgraded to Average. If the Portfolio Sustainability score is below 30, then no adjustment is made. The Morningstar Sustainability Rating is depicted by globe icons where High equals 5 globes and Low equals 1 globe. Since a Sustainability Rating is assigned to all funds that meet the above criteria, the rating it is not limited to funds with explicit sustainable or responsible investment mandates. Morningstar updates its Sustainability Ratings monthly. The Portfolio Sustainability Score is calculated when Morningstar receives a new portfolio. Then, the Historical Sustainability Score and the Sustainability Rating is calculated one month and six business days after the reported as-of date of the most recent portfolio. As part of the evaluation process, Morningstar uses Sustainalytics’ ESG scores from the same month as the portfolio as-of date. Please click on http://corporate1.morningstar.com/SustainableInvesting/ for more detailed information about the Morningstar Sustainability Rating methodology and calculation frequency. Sustainalytics is an independent ESG and corporate governance research, ratings, and analysis firm. Morningstar, Inc. holds a non-controlling ownership interest in Sustainalytics.

Morningstar Low Carbon Designation™

The Morningstar® Low Carbon Designation™ is intended to allow investors to easily identify low-carbon funds across the global universe. The designation is an indicator that the companies held in a portfolio are in general alignment with the transition to a low-carbon economy. The designation is given to portfolios that have low carbon-risk scores and low levels of exposure to fossil fuels. To determine carbon-risk scores and fossil fuel involvement, Morningstar uses Sustainalytics' company-level data. The Morningstar® Portfolio Carbon Risk Score™ measures the risk that companies in a portfolio face from the transition to a low-carbon economy. The Morningstar® Portfolio Fossil Fuel Involvement™ percentage assesses the degree to which a portfolio is exposed to thermal coal extraction and power generation as well as oil and gas production, power generation, and products & services. To receive a Morningstar Portfolio Carbon Risk Score, at least 67% of portfolio assets must have a carbon-risk rating from Sustainalytics. The percentage of assets covered is rescaled to 100% before calculating the score. To receive the designation, a portfolio must meet two criteria: 1) a 12-month trailing average Morningstar Portfolio Carbon Risk Score below 10 and 2) a 12-month trailing average exposure to fossil fuels less than 7% of assets, which is approximately a 33% underweighting to the global equity universe. Funds receive the Low Carbon designation based on the most recent quarterly calculations of their 12- month trailing average Morningstar Portfolio Carbon Risk Scores and Morningstar Portfolio Fossil Fuel Involvement. Funds holding the Low Carbon designation that no longer meet the criteria will not receive the designation for the subsequent quarter. All Morningstar Portfolio Carbon Metrics, including the Morningstar Portfolio Carbon Risk Score, Morningstar Portfolio Fossil Fuel Involvement, and the Morningstar Low Carbon Designation, are calculated quarterly. Please visit http://corporate1.morningstar.com/SustainableInvesting/ for more detail information about the Morningstar Low Carbon Designation and its calculation. Sustainalytics is an independent ESG and corporate governance research, ratings, and analysis firm. Morningstar, Inc. holds a non-controlling ownership interest in Sustainalytics.