Quick Facts
Inception Date:4/16/20017/1/2019
Expense Ratio:1.02%0.87%
Total Net Assets:$1.56 Billion  (6/30/20)
Category:Mid Cap Growth
Benchmark:Morningstar U.S. Mid Growth
Related Material:
   Fund Fact Sheet Q2 2020
   PM Commentary Q2 2020
   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 559 Midcap Growth funds as of 8/31/20.

Investment Style

Performance (%)

As of 8/31/203 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor9.4311.1414.5713.3712.7315.6311.499.79
BUFFALO DISCOVERY FUND - Institutional9.4511.2614.7313.5312.9015.8011.659.95
Morningstar U.S. Mid Growth Index15.1324.3132.3021.1116.4916.5511.229.28
Morningstar Mid-Cap Growth Category15.3816.7024.5716.2813.6314.679.947.70
As of 6/30/203 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor23.841.615.2511.349.8414.7411.339.37
BUFFALO DISCOVERY FUND - Institutional23.861.695.4111.5010.0114.9211.509.53
Morningstar U.S. Mid Growth Index34.6611.7717.3217.8112.9815.4510.898.77
Morningstar Mid-Cap Growth Category30.273.609.6512.589.9213.579.517.15
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 6/30/20)
Upside Capture73.34
Downside Capture97.39
Sharpe Ratio0.53
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 6/30/20) 
# of Holdings97
Median Market Cap$15.42 B
Weighted Average Market Cap$21.23 B
3-Yr Annualized Turnover Ratio88.94%
% of Holdings with Free Cash Flow77.08%
Active Share65.54%
Top 10 Holdings
HoldingTickerSector% of Net
The Cooper Cos.COOHealth Care1.81%
Take-Two InteractiveTTWOCommunications1.71%
Global PaymentsGPNIndustrials1.68%
CoStar GroupCSGPReal Estate1.67%
IHS MarkitINFOIndustrials1.60%
Bio-TechneTECHHealth Care1.57%
MSCIMSCIFinancial Services1.57%
EquinixEQIXReal Estate1.54%
SBA CommunicationsSBACReal Estate1.50%
Kansas City SouthernKSUIndustrials1.49%
As of 3/31/20. 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 6/30/20. 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 6/30/20. Market Cap percentages may not equal 100% due to rounding.


Dave Carlsen, CFA
Portfolio Manager

27 Years of Experience

 View full bio

Jamie Cuellar, CFA
Portfolio Manager

28 Years of Experience

 View full bio

Ken Laudan
Portfolio Manager

27 Years of Experience

 View full bio

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



(As of 6/30/20) — Equity markets rebounded sharply in the 2nd quarter following steep losses in the previous period. The S&P 500 Index produced a return of 20.54%, marking the best quarterly performance results in 20 years. Stimulus efforts by the Federal Reserve (the “Fed”) and the U.S. Treasury Department to limit COVID-related economic damage helped equity markets find a floor in late March. Declining COVID-19 case counts, optimism about treatment and potential vaccines, along with better-than-expected economic data also contributed to improved investor sentiment during the period. Although confirmed virus cases began spiking again in the final days of June, it was not enough to undo the best quarterly market results since the dot-com boom.

The broad market Russell 3000 Index advanced 22.03% in the quarter, and Growth outperformed Value as the Russell 3000 Growth Index moved up 27.99% during the period, compared to the Russell 3000 Value Index’s advance of 14.55%. Relative performance was inversely-correlated by market cap as the Russell Micro Cap Index advanced 30.54%, well above the large cap Russell 1000 Index’s return of 21.82%. Meanwhile the small cap Russell 2000 Index and the Russell Mid Cap Index were up 25.42% and 24.61%, respectively. The best performing sectors were Technology, Consumer Discretionary, and Energy while the less cyclically exposed, more defensive areas like Utilities, Telecommunication, and Consumer Staples lagged in the quarter.


(As of 6/30/20) — The Buffalo Discovery Fund (BUFTX) rose 23.84% for the quarter but underperformed the Morningstar U.S. Mid Growth Index’s return of 34.66%. Index results were largely driven by Technology stocks, as the sector meaningfully outperformed all other benchmark sectors and drove almost half of the Index’s return, and represented a third of the Index’s weight. The Healthcare and Consumer Discretionary sectors also rebounded strongly, posting greater than 30% returns.

Some of the Fund’s relative underperformance during the period is explained by the 1st quarter’s outperformance, as the Fund’s holdings declined less than the Index and therefore experienced less of a rebound during the 2nd quarter. Furthermore, it was difficult to keep pace with the Index in the Technology sector as it was largely driven by meaningful appreciation of already expensive high growth software stocks, many of which do not meet our valuation parameters. While we did have some high growth software stocks in the portfolio, we did not have enough of them to maintain pace with the Index. The Fund also underperformed in Healthcare mainly due to an underweight in biotechnology and a decline in eHealth, as explained below.


Etsy was the best performing position during the quarter, with a gain of almost 200%. With the spread of COVID-19, the shift to e-commerce is clearly a trend that has witnessed increased momentum, and Etsy, as a leading online arts and crafts marketplace, benefited disproportionately. The company did an excellent job during the pandemic of driving new customers to the platform and becoming the “go to” site for handmade masks and Personal Protective Equipment (PPE) for consumers.
As discussed above, high growth software stocks led the market in the 2nd quarter. For example, Twilio was a top performer for the Fund in the period gaining just over 140%. Despite having some exposure to weaker industries like travel, which concerned some investors early in the quarter, Twilio’s communication volumes have been excellent during the pandemic, led by messaging and video. The company remains the leader in Communications Platform as a Service (CPaaS), which we believe, is still in the early stages of growth.


eHealth was the largest underperformer for the portfolio in the period. Investors grew concerned about the company’s increase in churn rates and the effect on the lifetime value of customer contracts, which ultimately impact the company’s revenues. We believe eHealth will likely show better than expected revenue growth in the near term and the increased churn will moderate over time. Additionally, as more companies in the same industry come public (which is currently happening), investors will better understand eHealth’s operating model and take comfort in their operating metrics, potentially improving the stock’s valuation multiple.


(As of 6/30/20) — The 1st half of 2020 has been an extremely volatile period for the market, and given the market’s quick rebound despite a slower economy and continued COVID-19 concerns, heightened volatility may remain the norm for the rest of the year. In the near term, investors will likely continue to focus on the trajectory of COVID-19 cases, the progression of additional treatments and vaccines, and ongoing company commentary on business trends. While COVID-19 cases have increased in some highly populated states like California, Florida and Texas, which will restrain economic growth, we believe there will be a meaningful amount of data on vaccine and treatment options over the next few months that could be quite positive for those willing to look beyond near term case numbers. Furthermore, fiscal and monetary policy remain extremely accommodative and will likely remain so at least through the next Presidential election. While the election remains a wildcard, the market has taken Biden’s early lead in stride, contrary to prevailing wisdom that the market would suffer if Biden was elected. However, it is uncertain as to whether the market has fully vetted many of Biden’s policy positions, and the election is still four months away with plenty of time for lead changes to occur.

Due to a reduction in growth opportunities given a weaker economy, we are mindful that investors may have bid up certain high growth stocks to unsustainable valuations, and we continue to focus on the downside risk relative to upside opportunity for stocks in the portfolio. The disparity in returns between growth and value has been extreme this year, and at some point, there could be a meaningful reversion to the mean, likely triggered by successful clinical results from a potential vaccine. This rotation can sometimes be painful for growth investors as there will likely be selling of growth stocks to fund value stocks with higher operating leverage. However, our process remains the same regardless of the whims of the market: we continue to invest in innovative companies benefiting from long term trends, and, in our opinion, are trading at attractive valuations.

Lastly, the portfolio has experienced increased turnover this year due to the increased market volatility, positioning around COVID-19, and the addition of two new portfolio managers to the management team. Throughout the 2nd quarter, we have been adding new ideas into the portfolio while exiting positions with limited upside or unfavorable fundamentals. In the short term, this has increased the number of stocks in the portfolio to 96. We will look to reduce this number over time as we continue to add to positions with higher conviction while selling those with less upside opportunity. We remain thankful for your continued confidence in the Buffalo Discovery Fund and remain committed to providing superior long-term investment results for you, our shareholders.

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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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 559 for the 3-year, 3 stars among 502 for the 5-year, and 4 stars among 381 Mid-Cap Growth funds for the 10-year period ending 8/31/20.

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.