Quick Facts

(As of 6/30/17)


Inception Date
  April 16, 2001

Total Fund Assets
  $1.4 B

Expense Ratio

Benchmark Index
  Russell Midcap Growth


Overall Morningstar™ rating out of 576 Midcap Growth funds as of 6/30/17 (derived from a weighted average of the fund’s three-, five-, and ten-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.



Low High

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 576 funds in the Mid-Cap Growth category, as of 6/30/17.




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, 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.


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



(As of 6/30/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Discovery Fund4.9913.6120.499.1615.049.9812.409.00
Russell Midcap Growth Index4.2111.4017.057.8314.197.8710.348.27
Morningstar Mid-Cap Growth4.6812.3718.586.8612.726.819.026.28
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 6/30/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Discovery Fund4.9913.6120.499.1615.049.9812.409.00
Russell Midcap Growth Index4.2111.4017.057.8314.197.8710.348.27
Morningstar Mid-Cap Growth4.6812.3718.586.8612.726.819.026.28
Each Morningstar category average represents a universe of funds with similar objectives.
YearBuffalo Discovery Russell Midcap Growth IndexMorningstar Mid-Cap Growth Category
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 6/30/17)

vs Russell Midcap Growth Index
Upside Capture93.74
Downside Capture82.72
Standard Deviation10.77
Sharpe Ratio0.83

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.

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 6/30/17)

# of Holdings86
Median Market Cap$10.04 B
Weighted Average Market Cap$50.50 B
3-Yr Annualized Turnover Ratio52.20%
% of Holdings with Free Cash Flow84.88%
% of Holdings with No Net Debt36.05%
Active Share87.24%
HoldingTickerSector% of Net Assets
Align TechnologyALGNHealth Care1.92%
Verisk AnalyticsVRSKIndustrials1.85%
DanaherDHRHealth Care1.78%
Nielsen HoldingsNLSNIndustrials1.78%
NasdaqNDAQFinancial Services1.73%
Intercontinental ExchangeICEFinancial Services1.73%
Republic ServicesRSGIndustrials1.72%
View Full Holdings

As of 3/31/17. 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 6/30/17. 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 6/30/17. Market Cap percentages may not equal 100% due to rounding.


Equity markets got off to a strong start in the first quarter of 2017, thanks to an improving economic outlook. In February, small business optimism, as measured by the National Federation of Independent Businesses, was at its highest level in 12 years. In addition, the University of Michigan’s March consumer confidence survey showed that consumers were more confident in the economy than they have been at any time since 2000. Against this backdrop, growth stocks outperformed value stocks, led by technology, health care, and consumer discretionary companies. The recent strength in infrastructure companies, banks, and high-tax-rate stocks stalled late in the quarter when, following Congress’s failure to agree on a health care reform bill, investors began to question the Trump administration’s ability to enact elements of its pro-growth agenda. Within commodities, the price of West Texas Intermediate (WTI) crude oil fell 6% during the quarter in response to better than expected U.S. oil inventories and production.

The Russell 3000 Index advanced 5.74% in the first quarter and larger cap stocks outperformed smaller cap stocks. The Russell 1000 Index returned 6.03%, followed by the Russell Mid Cap Index return of 5.15%, and the Russell 2000 Index result of 2.47%. The Russell Micro Cap Index advanced just 0.38% in the quarter. The Russell 3000 Growth Index outperformed the Russell 3000 Value Index by 5.64%. Technology was the best performing sector during the quarter while the energy sector was the worst per-former, driven by the decline in crude oil.

For the twelve months ending March 31, 2017, the Russell 3000 returned 18.07%. Small caps generally outperformed large caps. The Russell Micro Cap Index was up 27.77%, and the Russell 2000 was up 26.22%. The Russell 1000 and Russell Midcap Index returned 17.43% and 17.03%, respectively. The Russell 3000 Value Index outperformed the Russell 3000 Growth Index 19.97% to 16.27% over the twelve month period. The technology and financial services sectors posted the best returns. Utilities and consumer staples lagged in performance. The dispersion in sector returns can be largely attributed to expectations for an improving economy and higher interest rates.


In the quarter, the Buffalo Discovery Fund appreciated 8.22% outperforming the Russell Mid Cap Growth Index which returned 6.89%. The outperformance in the period was driven by stock selection, with the strongest outperformance in the consumer staple, industrial and financial sectors. The top contributors to the Fund’s performance in the quarter were Align and FMC Corporation. Align has been a holding in the Fund for over ten years, a testament to our long term investment philosophy. The company continued to grow as penetration of Invisalign clear aligners for malocclusion expands. The company has gained share as innovative adaptations of the base technology have increased the addressable population. FMC Corporation is a diversified chemical company serving the agricultural, health and industrial markets. The stock has experienced strong performance for three primary reasons. The lithium business exceeded expectations in calendar 2016 due to strong demand, favorable pricing and good cost control. Secondly, the agriculture business is recovering from a cyclical downturn which was a result of oversupply and weaken-ing agricultural commodity prices. Thirdly, during the agricultural downturn the industry consolidated with FMC a beneficiary of the consolidation. FMC will acquire Dupont’s agricultural business at favorable terms as a result of a divesture required by regulators for the Dupont / Dow merger to close.

Top detractors for the quarter were Under Armour and Acuity Brands. Under Armour entered the fiscal year with a lofty valuation. As top line growth slowed, management deferred the highly anticipated margin expansion, and the stock declined. The decelerating top line was partly due to weaker apparel demand in North America, a fashion cycle in footwear that missed the mark, and store closures by bricks and mortar retailer’s such as The Sport’s Authority and Macy’s. We started to build a position mid-year and while the growth reacceleration is likely to take longer than we original forecasted, the valuation is compelling and we believe the company has a huge opportunity in front of it with less than 8% share in its addressable markets globally. Under Armour has benefited from the trend to healthier living and the brand equity remains strong despite the weaker than expected 2016 operating performance. Acuity Brands provides both residential and commercial LED lighting solutions. We have owned the stock for several years and the company has been a key beneficiary of the transition to LED lighting. As the stock appreciated we trimmed the position. Over the past two quarters growth has slowed modestly and the stock sold off, leading to a more compelling current valuation, in our view. We anticipate growth will reaccelerate in the back half of calendar year 2017.

The Fund ended the first quarter with 86 stocks representing 85 companies, as we hold both the Class A and Class B shares of Lion’s Gate Entertainment. The cash weighting as of March 31, 2017 was 2.6%.


After three months of optimism related to the Republican sweep in November’s elections, the reality of a laborious and uncertain political process is setting in. Regardless of the Administration’s success on the legislative front, certainly the regulatory backdrop has improved, resulting in increased business confidence. Nevertheless we are now eight years into an expansion, and the cycle is maturing. Our valuation discipline should prove to be a differentiator, particularly as the broader equity market appreciates and valuations extend.

The Buffalo Discovery Fund’s process is to invest based on the Buffalo Long Term Growth Trends. By limiting our investment universe to companies that we believe are beneficiaries of the Trends, we are exposed to businesses operating in secular growth markets. The Trends are relevant in any political environment. Over the intermediate to long term, the capital markets are highly efficient and companies exposed to the long term trends driving growth in our economy should outperform.

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.

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 4 stars among 576 for the three-year, 4 stars among 502 for the five-year, and 5 stars among 370 Mid-Cap Growth funds for the ten-year period ending 6/30/17.

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.

©2017 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.