Quick Facts
Inception Date:4/16/20017/1/2019
Expense Ratio:1.02%0.87%
Total Net Assets:$1.80 Billion  (7/1/19)
Category:Mid Cap Growth
Benchmark:Morningstar U.S. Mid Growth
Related Material:
   Fund Fact Sheet Q2 2019
   PM Commentary Q1 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 539 Midcap Growth funds as of 6/30/19.

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 6/30/193 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor6.3327.0813.1216.4711.2716.3410.929.60
BUFFALO DISCOVERY FUND - Institutional6.3727.1713.2916.6411.4316.5111.089.76
Morningstar U.S. Mid Growth Index7.0629.5815.6417.9411.6216.0810.718.31
Russell Midcap Growth Index5.4026.0813.9416.4911.1016.0210.259.11
Morningstar Mid-Cap Growth Category5.6124.979.8815.599.7814.539.297.04
As of 6/30/193 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor6.3327.0813.1216.4711.2716.3410.929.60
BUFFALO DISCOVERY FUND - Institutional6.3727.1713.2916.6411.4316.5111.089.76
Morningstar U.S. Mid Growth Index7.0629.5815.6417.9411.6216.0810.718.31
Russell Midcap Growth Index5.4026.0813.9416.4911.1016.0210.259.11
Morningstar Mid-Cap Growth Category5.6124.979.8815.599.7814.539.297.04

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.

As of July 27, 2018, the Morningstar U.S. Mid Growth Index has replaced the Russell Midcap Growth Index as the Fund’s primary benchmark. The Advisor believes that the new index is more appropriate given the Fund’s holdings.

3 Year Risk Metrics
BUFTX vs Morningstar U.S. Mid Growth Index (As of 6/30/19)
Upside Capture89.99
Downside Capture92.09
Sharpe Ratio1.15
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 6/30/19) 
# of Holdings82
Median Market Cap$14.94 B
Weighted Average Market Cap$18.06 B
3-Yr Annualized Turnover Ratio59.68%
% of Holdings with Free Cash Flow90.48%
Active Share69.51%
Top 10 Holdings
HoldingTickerSector% of Net
The Cooper Cos.COOHealth Care2.11%
MSCIMSCIFinancial Services1.84%
Roper TechnologiesROPIndustrials1.82%
IDEXX LabsIDXXHealth Care1.73%
Republic ServicesRSGIndustrials1.69%
Mettler Toledo InternationalMTDHealth Care1.69%
Align TechnologyALGNHealth Care1.69%
Bio TechneTECHHealth Care1.66%
Verisk AnalyticsVRSKIndustrials1.66%
Arista NetworksANETTechnology1.62%
As of 3/31/19. 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 6/30/19. 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 6/30/19. 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 3/31/19) — Equity markets rebounded sharply to start 2019. The widely followed S&P 500 Index returned 13.65% in the 1st quarter, its best quarterly performance in 10 years. The market advance can be largely attributed to the Federal Reserve’s decision to put quarterly short term interest rate hikes on hold and end its balance sheet runoff. Additionally, prospects for a trade agreement between the U.S. and China appeared to improve, and the U.S. Government reopened after its longest shut down in history.

The Russell 3000 Index advanced 14.04% in the 1st quarter. Growth outperformed value, with the Russell 3000 Growth Index returning 16.18% compared to a return of 11.93% for the Russell 3000 Value. By size, midcaps led the way this quarter with the Russell Midcap Index returning 16.54%, followed by a return of 14.58% for the small cap Russell 2000 Index and 14.00% for the large cap Russell 1000 Index. Technology, Real Estate, and Industrials were the best performing sectors, while Health Care and Financials were relative underperformers.


(As of 3/31/19) — The Buffalo Discovery Fund gained a very solid 19.52% during the quarter but trailed the benchmark Morningstar U.S. Mid Growth Index return of 21.03%. Stock selection within Information Technology and Health Care weighed on relative performance during the period. The Fund was not as aggressively-positioned in these sectors as the Index during a very strong rebound off December 2018 lows. The rebound was sparked by the Fed’s dovish pivot on interest policy, which rekindled appetite for risk. The Fund continues to invest in innovative growth stocks with relatively-attractive valuations, which we believe should be a key driver of above-index risk-adjusted returns over the long term.

Among the top contributors during the 4th quarter were MSCI, Inc. and Bio-Techne Corporation. MSCI, an index and exchange-traded fund (ETF) provider, rallied as prospects for asset-based fees improved and the market recovered. The company also reported quarterly results that showed its ETF business saw continued strong inflows and a sequential improvement in average fees despite the bout of market volatility.

Bio-Techne, a life sciences company that develops and sells biotechnology reagents and instruments for research and clinical diagnostic markets, reported better-than-expected quarterly results driven by strong biopharma industry demand for the company’s core protein sciences reagents and analytical solutions. The industry trend toward Good Manufacturing Practices (GMP), a system for ensuring that products are consistently produced and controlled according to quality standards, is driving a lift in average selling prices. Strong results in China, where organic growth exceeded 30%, also contributed to the positive performance.

The biggest detractors in the period were ABIOMED, Inc. and Take-Two Interactive Software. ABIOMED was weak following a U.S. Food and Drug Administration (FDA) letter to doctors noting a higher mortality rate for ABIOMED’s Impella RP heart pump in a post-FDA approval study than what was seen in pre-approval studies. The Impella RP product is designed for use in specific clinical situations while the majority of patients in the post-approval study did not meet ABIOMED’s original enrollment criteria for treatment with the device. Both the FDA and ABIOMED suggest the Impella RP device’s efficacy was studied in a high-risk pool for which it was not well suited. The news introduced near term uncertainty to a stock price that embeds high growth expectations but appears to be an over-reaction in the near term. Impella RP represents less than 5% of total company sales. We believe the device, along with the rest of the ABIOMED product line, is highly efficacious when used as intended. We continue to think the company has a long runway for growth and market share gains within a $30 billion market.

Take-Two Interactive Software shares were weak after it lowered its forward guidance due to slower-than-expected monetization of its recently launched Red Dead Redemption 2 video game title. Competition for game player’s time and attention has been intense recently amid rapid uptake of competitive free-to-play games like Fortnite and Electronic Art’s Apex Legends. That followed a crowded new release schedule for the industry. Investor expectations have fallen significantly due to the near-term competitive intensity. However, we expect the pending release of Red Dead Online to catalyze improved monetization. The pipeline is also solid with new content releases expected to accelerate in the near term. The company has premium content, some of the best game development talent in the industry, and remains a prime beneficiary of the positive business model effects of downloadable games and in-game content, combined with a favorable outlook for growth in new users and engagement.


(As of 3/31/19) — The market environment appears fertile for active growth stock investing. Interest rates, inflation, and unemployment remain relatively low by historical standards, providing a healthy backdrop for consumers and businesses. We don’t see a recession on the horizon nor a significant collapse in corporate earnings, but valuations are at lofty levels, especially for big secular growers. Earnings growth comparisons also get more difficult as we lap the positive effects of last year’s tax reform.

After a possible 1st quarter earnings reset, we suspect the backup in interest rates, a more dovish Federal Reserve stance, and a trade deal with China could extend the positive market sentiment. Later in the back half of 2019, market pundits could possibly return their focus to the Fed’s interest rate normalization process which may weigh on market multiples.

Taking all of this together, we believe a volatile, more discerning market could materialize through 2019. The volatility may favor judicious growth stock investors where a steady hand and active management with an eye toward quality, improving profit cycle dynamics, and relatively-attractive risk-adjusted returns could hold an advantage.

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. 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 4 stars among 539 for the 3-year, 4 stars among 484 for the 5-year, and 4 stars among 367 Mid-Cap Growth funds for the 10-year period ending 6/30/19.

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. ©2019 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.