Inception Date
  April 16, 2001

Total Fund Assets
  $2.14 Billion  (9/30/18)

Expense Ratio

Benchmark Index
  Morningstar U.S. Mid Growth


Overall Morningstar Rating™ out of 540 Midcap Growth funds as of 9/30/18 (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 540 funds in the Mid-Cap Growth category, as of 9/30/18.


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 to 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 9/30/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND5.6610.9415.8715.5813.0815.1112.189.60
Morningstar U.S. Mid Growth Index7.8617.0324.7617.0712.8512.8311.288.25
Russell Midcap Growth Index7.5713.3821.1016.6513.0013.4611.109.16
Morningstar Mid-Cap Growth Category6.4813.4220.3115.8111.6811.9710.147.20
As of 9/30/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND5.6610.9415.8715.5813.0815.1112.189.60
Morningstar U.S. Mid Growth Index7.8617.0324.7617.0712.8512.8311.288.25
Russell Midcap Growth Index7.5713.3821.1016.6513.0013.4611.109.16
Morningstar Mid-Cap Growth Category6.4813.4220.3115.8111.6811.9710.147.20
vs Morningstar U.S. Mid Growth Index
(As of 9/30/18)
Upside Capture88.28
Downside Capture86.51
Sharpe Ratio1.60

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.

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 9/30/18) 
# of Holdings91
Median Market Cap$15.55 B
Weighted Average Market Cap$52.80 B
3-Yr Annualized Turnover Ratio50.28%
% of Holdings with Free Cash Flow92.31%
Active Share76.85%
HoldingTickerSector% of Net Assets
Align TechnologyALGNHealth Care2.07%
AthenaHealthATHNHealth Care1.85%
Mylan N VMYLHealth Care1.79%
NasdaqNDAQFinancial Services1.75%
S&P GlobalSPGIFinancial Services1.70%
Verisk AnalyticsVRSKIndustrials1.63%
Roper TechnologiesROPIndustrials1.63%
MSCIMSCIFinancial Services1.61%
AmazonAMZNConsumer Discretionary1.57%
View Full Holdings

As of 6/30/18. 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 9/30/18. 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 9/30/18. Market Cap percentages may not equal 100% due to rounding.



(As of 6/30/18) — Supportive economic data drove positive domestic equity performance in the 2nd quarter. The unemployment rate declined to 3.8%, the lowest level in 18 years. Wages have continued to rise, with average hourly earnings up 2.7% as of May. Corporate earnings growth continued to be robust. The Federal Reserve increased their target rate by 0.25% and raised their forecast for growth and inflation again in June. Meanwhile, economic growth outside the U.S. slowed, with the divergence driving strength in the U.S. dollar. Increasing trade protectionism along with the dollar’s strength, led to the relative outperformance of domestically focused industries and smaller capitalization companies, which generally do less international business than large caps. Crude oil prices continued to rise, despite the strong dollar, driven by lower stockpiles in the U.S. and President Trump’s decision to withdraw from the Iran nuclear accord.

The Russell 3000 Index returned 3.89% in the quarter. Growth continued to outpace value, with the Russell 3000 Growth Index up 5.87% and the Russell 3000 Value Index up 1.71%. By size, the Russell Microcap Index led the way with a return of 9.97%, followed by the small cap Russell 2000 Index at 7.75%. The large cap Russell 1000 Index was up 3.57%, and the Russell Midcap Index was up 2.82%. Energy was the best performing sector, driven by strength in crude oil prices. The Consumer Discretionary, Information Technology, and Real Estate sectors also had strong quarters. Meanwhile, trade fears and rising input costs caused the underperformance of Industrials, and Financials were weaker as a result of the yield curve flattening.


(As of 6/30/18) — The Buffalo Discovery Fund gained 3.71% during the quarter, outperforming the benchmark Russell Midcap Growth Index, which gained 3.16%. The outperformance was fueled by broad-based positive stock selection within the Financials, Technology, Materials, Health Care, and Energy sectors. Industries with standout performance included software and internet services, semiconductors, energy equipment and services, health providers and services, and diversified financial services. Poor selection effect in the Industrials sector was a modest offset, with auto components, building products, and industrial conglomerates hurt by global trade concerns and rising input costs.

Align Technology, the maker of clear aligners for dental malocclusion and a long-term holding in the Fund, continued to grow and attract new investors in the period. We believe robust growth is sustainable over the intermediate to long term, as the company has expanded its products to address nearly 70% of the orthodontic market while less than 15% of the orthodontic market has converted from metal braces to clear aligners.

Evolent Health offers software tools, analytics, and best practice services to healthcare providers to manage populations of patients through valued based care. The stock rebounded when new contract signings growth re-accelerated after a pause, disproving concerns of a slowdown in signings caused by government policy uncertainty and potential repeal of the Affordable Care Act.

Xylem Inc. is a global smart water infrastructure company, growing share and experiencing a positive shift in its margin structure as it transitions to higher value added technology enabled pumps and sensors, which deliver higher levels of productivity and efficiency for municipal and industrial customers. The stock fell during the quarter after margin guidance did not live up to high Wall Street expectations. We remain positive on the multi-year earnings power of the company and the durability of the secular drivers for water infrastructure in developed and developing markets.

BlackBerry LTD is a leading provider of enterprise mobility management software for connecting, securing, and managing connected devices in the enterprise and beyond. In the short term, analysts have become more skeptical of the company’s reiteration of a fiscal year guide for meaningful growth in its core enterprise mobility software segment after it experienced a decline in the most recent quarter, its fiscal 1st quarter. Longer term, we expect the company to benefit from the growth in connected devices in the enterprise as the Internet of Things and digital transformation initiatives in the workplace gain steam.


(As of 6/30/18) — The market environment for equities remains favorable. Interest rates, inflation, and unemployment remain low, while wages and corporate earnings grind higher, buoyed by ongoing benefits of tax reform and improved consumer spending patterns.

As growth strengthens, inflation expectations, rising input costs, and the pace at which the Fed intends to normalize interest rates and the central bank balance sheet could introduce bouts of market volatility. Also, the degree to which Jerome Powell, the new Federal Reserve chairman, will utilize the “Fed Put” when volatility reins remains to be seen. For now, his messaging and mandate suggests normalization with a much lower “Fed Put” than we’ve become accustomed.

It stands to reason that every basis point higher the market allows Mr. Powell to take rates today provides more room to temper volatility later. Today, times are good — earnings are good, wages are good, and employment is good. Therefore, volatility protection is cheap. Given rates are at historic lows and so little conventional interest rate accommodation exists, we believe Mr. Powell would be wise to bank that volatility protection when the market is cheerful rather than fearful.

The Fed’s apparent desired path is to gradually cede some market stabilization control back to the free markets, which historically have been more unforgiving than some stock market participants have become accustomed to these last several years. As a result, correlations should fall, and we could see the market become choppier and more data point driven. Day to day concerns, like a global trade war breaking out for example, can cause big market swings following each data point that validates or contradicts the climate of opinion.

Volatility is also opportunity. If correlations fall and volatility picks up as we expect, the environment should evolve more toward a stock picker’s market, where a steady hand and active management with an eye toward quality and relatively attractive risk-adjusted returns could hold advantage over passive money strategies. We stand poised to capitalize where we see near term stock price volatility present the opportunity to improve risk-adjusted expected returns for 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 3 stars among 540 for the three-year, 4 stars among 483 for the five-year, and 5 stars among 342 Mid-Cap Growth funds for the ten-year period ending 9/30/18.

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.