Quick Facts
Inception Date:4/16/20017/1/2019
Expense Ratio:1.01%0.86%
Total Net Assets:$1.81 Billion  (6/30/21)
Category:Mid Cap Growth
Benchmark:Morningstar U.S. Mid Growth Index
Related Material:
   Fund Fact Sheet Q2 2021
   PM Commentary Q2 2021
   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 Rating


Overall Morningstar Rating™ of BUFTX based on risk-adjusted returns among 548 Midcap Growth funds as of 8/31/21.

Investment Style

Performance (%)

As of 8/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO DISCOVERY FUND - Investor7.1611.6634.4418.0518.2116.6712.9711.2910.88
BUFFALO DISCOVERY FUND - Institutional7.2011.7634.6418.2318.3916.8413.1411.4611.05
Morningstar U.S. Mid Growth Index13.1015.7536.1123.7422.9217.2413.0111.1610.47
Morningstar Mid-Cap Growth Category8.2314.7837.2119.7719.9515.8211.8510.409.00
As of 6/30/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO DISCOVERY FUND - Investor5.488.3342.6619.3118.8615.1013.0410.5410.81
BUFFALO DISCOVERY FUND - Institutional5.508.4142.8819.5019.0415.2713.2110.7010.98
Morningstar U.S. Mid Growth Index11.339.5243.2424.7922.4815.3312.329.8210.26
Morningstar Mid-Cap Growth Category7.0010.8048.1721.2620.1814.0711.409.609.51

BUFFALO DISCOVERY FUND - Investor-0.6919.7336.6110.685.645.5625.44-6.5431.6333.81
BUFFALO DISCOVERY FUND - Institutional-0.5419.9136.8210.855.805.7225.62-6.4031.8234.03
Morningstar U.S. Mid Growth Index-2.2915.8134.079.77-0.716.4625.67-3.1636.0146.17
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 6/30/21)
Upside Capture73.02
Downside Capture89.51
Sharpe Ratio0.92
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 6/30/21) 
# of Holdings79
Median Market Cap$20.39 B
Weighted Average Market Cap$23.92 B
3-Yr Annualized Turnover Ratio92.49%
% of Holdings with Free Cash Flow79.75%
Active Share79.49%
Top 10 Holdings
HoldingTickerSector% of Net
ExpediaEXPEConsumer Discretionary2.24%
Ligand PharmaceuticalsLGNDHealth Care2.12%
Kansas City SouthernKSUIndustrials2.07%
Generac HoldingsGNRCIndustrials1.99%
IHS MarkitINFOIndustrials1.94%
Darden RestaurantsDRIConsumer Discretionary1.88%
Universal Display CorpOLEDTechnology1.80%
Keysight TechnologiesKEYSTechnology1.72%
As of 3/31/21. 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 6/30/21. 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 6/30/21. Market Cap percentages may not equal 100% due to rounding.


Dave Carlsen, CFA
Portfolio Manager

29 Years of Experience

 View full bio

Jamie Cuellar, CFA
Portfolio Manager

29 Years of Experience

 View full bio

Ken Laudan
Portfolio Manager

28 Years of Experience

 View full bio

  Click here to read about the recent portfolio manager changes for the Buffalo Discovery Fund.



(As of 6/30/21) — Equity markets moved higher for the fifth consecutive quarter, as the S&P 500 Index returned 8.55%, raising the year-to-date return to 15.25%. The COVID-19 vaccine rollout has helped fuel an economic comeback while corporate earnings are improving. The vaccine adoption around the world is encouraging, and over 50% of the U.S. population is now vaccinated. Capital markets continued to be supported by significant spending from Congress and aggressive monetary policy from the Federal Reserve (the Fed). The 2nd quarter was marked by outperformance of growth stocks, overcoming investor concerns of rising inflation and potential interest rate hikes in the prior quarter. Hawkish comments from the Fed replaced inflation worries with concerns about the magnitude and duration of the economic recovery. Long duration growth companies were beneficiaries as yields on the 10-Year and 30-Year Treasuries declined during the period after climbing for the previous four months.

The broad market Russell 3000 Index advanced 8.24% in the quarter. Growth stocks outperformed Value stocks, as the Russell 3000 Growth Index surged 11.38% compared to the Russell 3000 Value Index gain of 5.16%. Relative performance was correlated with market cap size in the quarter, as the large cap Russell 1000 Index returned 8.54%, the Russell Midcap Index advanced 7.50%, the small cap Russell 2000 Index returned 4.29%, and the Russell Microcap Index finished 4.14% higher.

All economic sectors produced positive returns during the period with the exception of Telecom Services. Real Estate, Information Technology, and Energy led the advance followed by Financials and Health Care. More defensive areas, such as Telecom Services, Utilities, and Consumer Staples, trailed on a relative basis.


(As of 6/30/21) — The Buffalo Discovery Fund (BUFTX) gained 5.49% during the quarter versus the Morningstar U.S. Mid Growth Index gain of 11.33%. The Fund was not as aggressively positioned in the high-multiple, more speculative oriented cohort of stocks within the Information Technology, Consumer Discretionary, and Health Care sectors. This cohort, initially under pressure due to high valuations and broadening growth, dramatically reversed course mid-quarter and surged higher, when an uptick in the Delta variant arose, incrementally more hawkish Fed commentary was given, and the ongoing supply constraints combined to throw cold water on the reopening/recovery trade. The Fund continues to invest in disruptive and innovative growth companies with relatively-attractive valuations, a strategy we believe should be a key driver of above-index risk-adjusted returns over the long term.


Generac was the largest contributor during the quarter. Generac continues to gain investor attention as demand for its home standby generators likely increased massively during the Texas power crisis in February 2021. When combined with rolling blackouts in California, increased frequency and intensity of hurricanes, and their entry into the home battery backup market, it is easy to see why demand for Generac’s products has increased immensely and the stock has responded.

MSCI, an index and ETF provider, rallied as strong flows to passive products and its leverage to a rising market and asset-based fees supported continued strong growth prospects. Additionally, prior investments in building out a core competency in Environmental/Social/Governance (ESG) ratings is proving successful, with strong uptake and a bright future for this large new growth segment. Overall, retention rates continue to rebound, providing confidence that COVID-driven cancellations were indeed a one-time occurrence.


Ligand Pharmaceuticals was one of the biggest detractors during the quarter but the stock was still up over 30% YTD ending June 30, 2021, following its top contributor status in the previous quarter. The pullback followed lower-than-expected sales of Ligand’s Captisol product, used in Gilead’s antiviral drug for the treatment of COVID-19, as weather effects caused about $12 million of revenue to shift from the 1st quarter 2021 to the 2nd quarter 2021. Lower hospitalization will eventually lead to lower Captisol revenues, but we believe there is additional upside to come from Ligand, as its lead drug discovery platform, OmniAb, continues to see licensees get closer to commercialization, which could generate sustained high margin royalty revenue for Ligand.

Penn National Gaming, Inc. was also a detractor during the quarter following a strong run since the pandemic lows in 2020. Profit taking was driven by fears of peaking growth rates, as we begin to lap the easy comparisons of last year. The company is an owner and manager of gaming and racing properties, sports betting operations, and video gaming terminals, including 41 properties in 19 states. Additionally, the company recently purchased a 36% equity interest in Barstool Sports, Inc., a leading digital sports, entertainment, and media platform that transformed their secular growth opportunity. The combination of the Barstool’s audience, brand, and marketing engine along with Penn’s large geographic footprint create an unrivaled omni-channel offering that we believe could produce more durable growth than investors currently anticipate.


(As of 6/30/21) — The market environment remains constructive for equity investing. Interest rates and inflation remain relatively low by historical standards, providing a healthy backdrop for corporate earnings growth and investors’ allocation to equities. Vaccines are available for those who want them, which is contributing to increased mobility, improved business and consumer confidence, and rapidly-improving economic activity. Supply constraints, labor shortages, shipping bottlenecks, and a slow return to work are causing transitory inflation and holding back the economy in the near-term, but as these things ease, robust corporate earnings growth is poised to follow suit, in our opinion.

As we get deeper into recovery, concerns about high debt levels, rising tax rates, decelerating growth, virus mutations, vaccine hesitancy, and a more hawkish Fed could begin to affect equity valuations. Inflation, and the Fed response to it, will be of vigorous interest throughout the remainder of the year. In its latest public messaging, we think the Fed has already passed the threshold from dovish to hawkish regarding its messaging on inflation. As the drum-beat for Fed tapering grows louder, we think the market could transition incrementally away from speculative and early cycle stocks and rotate increasingly to growth and quality, as tapering begins to reduce liquidity, while peaking growth rates cause investors to be more discerning about cyclically-oriented equities.

We continue to seek opportunities where thoughtful management teams are in a favorable position to use innovation for market advantage, durable growth, and sustained shareholder value creation. We remain ever mindful of valuations, as there are still signs of excess in areas like high growth software. We continue to tighten up the portfolio and focus on our favorite ideas – there are now 79 positions in the Fund, down from 81 in the prior quarter. Finally, we welcomed three new small/mid cap equity analysts to the team, who will help broaden and deepen our research into attractively-priced, financially-strong, well-managed companies which could benefit from innovative strategies and disruptive megatrends, in our opinion. Thank you for your continued 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.

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 548 for the 3-year, 3 stars among 490 for the 5-year, and 4 stars among 384 Mid-Cap Growth funds for the 10-year period ending 8/31/21.

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. ©2021 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.