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 Q2 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 538 Midcap Growth funds as of 8/31/19.

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 8/31/193 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor6.7627.696.8214.4411.3315.1711.789.53
BUFFALO DISCOVERY FUND - Institutional6.8127.836.9914.6111.5015.3411.949.70
Morningstar U.S. Mid Growth Index5.7527.795.2115.9410.7814.8811.288.15
Russell Midcap Growth Index7.5326.685.9614.9210.7214.8510.889.05
Morningstar Mid-Cap Growth Category6.2824.211.6613.629.3813.399.896.93
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.
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 Care1.94%
Verisk AnalyticsVRSKIndustrials1.77%
MSCIMSCIFinancial Services1.77%
IDEXX LabsIDXXHealth Care1.77%
CopartCPRTConsumer Discretionary1.72%
Republic ServicesRSGIndustrials1.72%
International Flavors & FragranceIFFMaterials1.60%
IHS MarkitINFOIndustrials1.59%
Align TechnologyALGNHealth Care1.58%
Exact SciencesEXASHealth Care1.56%
As of 6/30/19. 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 6/30/19) — The S&P 500 Index posted its best 1st half of a calendar year since 1997, rising 18.54% from January 1 to June 30. During the most recent quarter, the index was in negative territory for the first two months (April and May) then rose 7.05% in the final month, marking the best June since 1955, and finished with a return of 4.30% for the quarter.

Central banks and trade policies continued to drive financial markets during the period. The threat of increasing tariffs against China and Mexico contributed to the sell-off early in the quarter, and the June rally was largely a result of dovish central bank commentary, leading investors to anticipate rate cuts in the coming months.

The Russell 3000 Index returned 4.10% in the quarter. By style, growth outpaced value, with the Russell 3000 Growth Index up 4.50% and the Russell 3000 Value Index up 3.68%. Large caps generally outperformed small caps in the quarter. The Russell 1000 Index returned 4.25%, just ahead of the Russell Mid Cap Index return of 4.13%. The Russell 2000 returned 2.10% during the quarter. Financials were the best performing sector, followed by Materials and Information Technology. Energy was the only sector to post a negative return, driven by a decline in oil prices. Health Care and Real Estate also underperformed relative to the broad market.

(As of 6/30/19) — The Buffalo Discovery Fund returned 6.33% during the quarter, shy of the benchmark Morningstar U.S. Mid Growth Index return of 7.06%. High-multiple, long-duration growth stocks responded favorably to the Federal Reserve’s hint at its June Federal Open Market Committee (FOMC) meeting that interest rate cuts to sustain economic growth could be forthcoming. In general, the Fund was not as aggressively positioned in this cohort as the benchmark. Relative to the benchmark, the portfolio’s top three contributing sectors were Financials, Health Care and Industrials. Consumer Discretionary and Information Technology were relative laggards.

Among the top contributors during the quarter were MSCI and IDEXX Labs. MSCI, an index and investment analytics services provider, rallied on strong investment flows into passive products and leverage to a rising market, and asset-based fees support continued strong growth prospects. IDEXX Labs, a lab analysis company for pets and livestock, reported better than expected quarterly results, driven by share gains and better than expected margins due to strong adoption of their premium-priced, single-use, on-site diagnostic test kits.

The biggest detractors in the period were Blackberry and Arista Networks. Blackberry’s stock was pressured when growth in its software category, which is key to the company’s long-term value creation story, did not meet the pace at which investors expected in the near term. Arista Networks, a datacenter software and equipment provider, fell after it guided to lower than expected revenue growth, as its tier 1 cloud customers temporarily slowed spending to digest recent capacity additions.

(As of 6/30/19) — 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 corporate earnings growth. Meanwhile, global central bankers have recently pledged additional stimulus measures to boost inflation and keep the long-running economic expansion alive.

Countering this healthy backdrop are high valuations and deteriorating leading indicators on global trade. Easy money for much of the past 10 years and rising expectations for more to come, have led to asset inflation and generally elevated growth stock valuations. Meanwhile, global trade tensions are weighing on consumer and business confidence, where recent surveys point to a slowdown amongst global purchasing managers. In the near to intermediate term we suspect pockets of weakness could emerge, particularly for the more global and cyclically oriented companies. We have trimmed positions in this area to avoid asymmetric risk associated with high valuation and the potential for downward estimate revisions.

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 Fund continues to invest in disruptive and innovative growth companies with relatively attractive valuations, a strategy we believe should be a key driver of above-index, risk-adjusted returns over the long term.

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 538 for the 3-year, 4 stars among 487 for the 5-year, and 4 stars among 372 Mid-Cap Growth funds for the 10-year period ending 8/31/19.

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.