Quick Facts

(As of 6/30/17)


Inception Date
  April 16, 2001

Total Fund Assets
  $1.4 Billion

Expense Ratio

Benchmark Index
  Russell Midcap Growth


Overall Morningstar™ rating out of 576 Midcap Growth funds as of 8/31/17 (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 8/31/17.


Discovery Fund Webcast – September 2017

During this webcast, we covered:
• How innovative companies can lead to above average growth
• Key objectives of the Fund and their impact on current performance
• Our proprietary portfolio management process
• Fund performance YTD


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


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.

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.

View our recent webcast

Having trouble viewing the video? Click here to open the video directly in your browser.

Performance (%)

As of 8/31/173 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo Discovery Fund5.1317.7217.8510.3915.0110.3713.769.14
  Russell Midcap Growth Index2.6914.0614.527.8813.998.3211.308.33
  Morningstar Mid-Cap Growth2.7913.6214.936.8012.357.039.826.32
As of 6/30/173 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
YearBuffalo Discovery Russell Midcap Growth IndexMorningstar Mid-Cap Growth Category
(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. Each Morningstar category average represents a universe of funds with similar objectives.

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 continued their strong start to the year during the second quarter, primarily driven by strong corporate earnings growth. The Russell 3000 Index advanced 3.02% in the second quarter. As reported during the June 30 period, earnings from S&P 500 Index companies were up 14% year-over-year in the first quarter, the strongest growth reading since 2011.

Broadly speaking, growth stocks continued their outperformance relative to value stocks, while cyclical stocks that rallied to end 2016 underperformed as investors continue to discount the likelihood of government infrastructure spending and comprehensive tax reform.

The yield on the U.S. 10-year Treasury ended the June 30 period at 2.298%, a decline from its recent high of 2.609% in March due in large part to weaker inflation readings. In contrast, the outlook for growth and interest rate expectations improved in much of the rest of the world, which has driven the trade weighted U.S. dollar down 5.6% year to date. Oil entered bear market territory, with crude prices declining 9% during the quarter in response to stronger than expected inventory levels and rising U.S. production.

As mentioned above investors continued to favor growth over value, and the Russell 3000 Growth Index climbed 4.65% during the period compared to the more modest gain of 1.29% for the Russell 3000 Value Index. By size, microcaps were the best performers with the Russell Microcap Index gaining 3.83%. Meanwhile the large cap Russell 1000 Index gained 3.06%, followed by the Russell Midcap Index at 2.70% and the Russell 2000 Index finishing with a gain of 2.46% during the period.

In general health care was the best performing sector as the chances for legislation to repeal or reform the Affordable Care Act appeared to diminish, and investors reacted by bidding up health care stocks. The technology sector was also a strong performer as the market continued to reward the strong earnings growth produced in this area. Conversely, energy was the worst performing sector driven by the decline in oil prices mentioned above.


The Buffalo Discovery Fund produced a return of 4.99% during the period and outperformed the Russell Midcap
Growth Index return of 4.21%. Overall the outperformance was fueled by our growth stock bias and strong portfolio results in the consumer and healthcare sectors. The Fund experienced strong consumer stock selection and a positive sector allocation effect despite a relatively weak consumer group overall. While the consumer discretionary and consumer staples sectors in the Russell Midcap Growth Index underperformed the broad market and produced negative total returns, both segments generated positive total returns for the Fund and made a positive performance contribution respectively. Standouts included gaming companies Electronic Arts and Take-Two Interactive where Wall Street gained newfound appreciation for the continued evolution toward recurring digital subscriptions and high margin in-game content.

Healthcare was the best performing sector for the Fund during the quarter as our relative overweight position combined with constructive stock selection made a strong positive contribution. Healthcare has bounced back in calendar year 2017 as political and populist backlash against drug pricing has faded along with the near term prospects for meaningful healthcare reform. Noteworthy contributors here included long-time holding Align Technologies, which continues to exceed analyst expectations for growth and share gain in the clear dental aligner market, and Portola Pharmaceuticals, a relatively new addition to the Fund. Shares of Portola were up sharply in the quarter after it received U.S. Food and Drug Administration (FDA) approval for its oral blood thinning drug which promises a more effective and convenient treatment than the injectable drugs currently in use.

To the downside, the energy and information technology sectors detracted from performance results during the
quarter. Energy, as mentioned above, was the worst performing sector of the market and while our exposure was small at less than 3% of Fund assets it was a headwind to results given a decline of 17% for the sector during the period. Meanwhile information technology suffered from stock selection in the quarter as price and earnings momentum factors led benchmark returns and the Fund did not own enough of the index’s more significant performers where valuations have exceeded our definition of an attractive risk vs. reward tradeoff. Our largest individual detractors were Nevro Corporation and TechnipFMC during the period. Nevro offers high frequency spinal cord stimulation (SCS) devices that treat back and leg pain more effectively than competing low frequency SCS devices. As a result it has rapidly gained nearly 15% market share and remains well positioned for further gains. It stumbled in the quarter as its sales force expansion and productivity did not keep up with rising growth expectations. TechnipFMC is an energy services company that was negatively impacted by declining oil prices and a delay in subsea drilling activity.


Looking ahead, we see a number of tailwinds for equity investors in the second half of 2017. Interest rates and inflation remain low, consumer spending is improving, business investment is trending up, employment is strong, and major international economies have joined the U.S. in recovery. Corporate earnings and the world economy should grind higher at a deliberate pace of growth under the watchful eye of global policy makers who promise to do what it takes to ward off volatility and a crisis of confidence. The tepid, not too hot, nor too cold economic environment combined with a perceived central bank backstop should continue to foster lower interest rates, modest corporate earnings growth and stability with respect to above average equity valuation levels. We believe this scenario should favor growth stock investing.

Meanwhile, pro-growth Trump administration policies like tax reform, infrastructure investment and lower regulation, if ultimately passed, promise to have a widespread positive economic impact that could kick up growth rates, inflation expectations and the pace at which the U.S. Federal Reserve normalizes interest rates and reduces the central bank balance sheet. The market would likely broaden and rotate to favor stocks with a more growth cyclical bent if this scenario unfolds. We own both cyclical growth and secular growth companies and don’t spend too much time attempting to forecast which environment will unfold in the near future. Instead we focus on what the market offers us in value today relative to our belief in the long term earnings prospects of the premier innovators in our growth universe. As the market continues to gyrate between growth and cyclical growth we have benefited from our bottom up approach, primarily through focusing on high quality growth companies and buying them when the long term risk / reward is favorable.

As always, we stand poised to capitalize when and where we see an opportunity to improve the risk-adjusted expected returns within 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, in our view. 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.

Sign Up for Automatic Updates

Stay up-to-date with the most recent media coverage and press releases about the Buffalo Funds.


Terms of Use – Email lists are created for use by U.S. investment professionals only and are published strictly for informational purposes. Providing access to the content of these emails does not explicitly or implicitly constitute a solicitation of services or products of the Buffalo Funds, Kornitzer Capital Management, or any of their affiliates. The information contained in the emails is not intended for distribution to, or for use by, investment professionals in a jurisdiction where distribution or purchase is not authorized. The information contained in these emails is not appropriate for use by individual investors. By registering for any of these emails, you agree to Buffalo's terms and conditions and that you are qualified as an institutional investor or otherwise member of a registered broker/dealer, registered investment advisor, or investment consulting firm.


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 5 stars among 576 for the three-year, 4 stars among 498 for the five-year, and 5 stars among 369 Mid-Cap Growth funds for the ten-year period ending 8/31/17.

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.