Quick Facts
Inception Date:4/16/20017/1/2019
Expense Ratio:1.02%0.87%
Total Net Assets:$1.80 Billion  (12/31/20)
Category:Mid Cap Growth
Benchmark:Morningstar U.S. Mid Growth
Related Material:
   Fund Fact Sheet Q4 2020
   PM Commentary Q3 2020
   Summary Prospectus

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.

Dave Carlsen, CFA, Co-Portfolio Manager

Morningstar Rating


Overall Morningstar Rating™ of BUFTX based on risk-adjusted returns among 564 Midcap Growth funds as of 12/31/20.

Investment Style

Performance (%)

As of 12/31/203 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor19.6033.8133.8118.0816.8715.2712.5610.65
BUFFALO DISCOVERY FUND - Institutional19.6334.0334.0318.2617.0415.4412.7310.82
Morningstar U.S. Mid Growth Index19.3846.1746.1724.4020.8315.5911.9610.02
Morningstar Mid-Cap Growth Category21.0339.2639.2619.7717.8013.8310.878.52
As of 12/31/203 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor19.6033.8133.8118.0816.8715.2712.5610.65
BUFFALO DISCOVERY FUND - Institutional19.6334.0334.0318.2617.0415.4412.7310.82
Morningstar U.S. Mid Growth Index19.3846.1746.1724.4020.8315.5911.9610.02
Morningstar Mid-Cap Growth Category21.0339.2639.2619.7717.8013.8310.878.52
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 12/31/20)
Upside Capture74.54
Downside Capture94.46
Sharpe Ratio0.84
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 12/31/20) 
# of Holdings89
Median Market Cap$17.68 B
Weighted Average Market Cap$22.81 B
3-Yr Annualized Turnover Ratio95.77%
% of Holdings with Free Cash Flow75.28%
Active Share74.67%
Top 10 Holdings
HoldingTickerSector% of Net
Penn National GamingPENNConsumer Discretionary2.26%
IHS MarkitINFOIndustrials1.73%
CoStar GroupCSGPReal Estate1.67%
Kansas City SouthernKSUIndustrials1.62%
Take-Two InteractiveTTWOCommunications1.58%
Generac HoldingsGNRCIndustrials1.53%
As of 9/30/20. 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 12/31/20. 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 12/31/20. Market Cap percentages may not equal 100% due to rounding.


Dave Carlsen, CFA
Portfolio Manager

29 Years of Experience

 View full bio

Jamie Cuellar, CFA
Portfolio Manager

29 Years of Experience

 View full bio

Ken Laudan
Portfolio Manager

28 Years of Experience

 View full bio

  Click here to read about the recent portfolio manager changes for the Buffalo Discovery Fund.



(As of 9/30/20) — Equity markets sustained their momentum in the 3rd quarter, with the S&P 500 Index returning 8.93%. Macro data continued to improve, and companies broadly reported earnings that proved to be more resilient than expectations. While the U.S. experienced another spike in COVID-19 cases during the quarter and tragically surpassed 200,000 deaths, positive news on vaccines and therapy fronts continued to provide hope for investors.

The Russell 3000 Index increased 9.21% in the quarter. Growth continued to outperform value, as the Russell 3000 Growth Index advanced 12.86%, compared to the Russell 3000 Value Index return of 5.41%. Relative performance was correlated with market cap size in the quarter, with the large cap Russell 1000 Index delivering a return of 9.47%, compared to the Russell Mid Cap Index return of 7.46%, the smaller cap Russell 2000 Index return of 4.93%, and the Russell Micro Cap Index return of 3.69%. More cyclically-exposed Consumer Discretionary, Materials, and Industrial sectors performed best in the quarter. Energy was the sole declining sector, hurt by lingering weakness in oil demand.


(As of 9/30/20) — The Buffalo Discovery Fund (BUFTX) outperformed in the 3rd quarter gaining 10.11% versus the Morningstar U.S. Mid Cap Growth Index’s gain of 9.56%. The Fund outperformed the benchmark with help from positive stock selection in the Health Care and Consumer Discretionary sectors, where two of our top performers, Penn National Gaming and Immunomedics, made meaningful contributions. Meanwhile, negative stock selection within the Information Technology sector was a modest headwind, as richly-valued, high-growth software stocks, in which the portfolio is underweight, led returns. Furthermore, the Fund did not own two of the benchmark’s more significant quarterly performers that were relatively large positions in the index, Square and Zoom Video Communications, which were up nearly 55% and 85% respectively.


Penn National Gaming (PENN) owns, manages, or has ownership interests in 41 gaming properties in 19 states and is an exclusive gaming partner with Barstool Sports, a leading digital sports, entertainment, and media platform. The Barstool Sports partnership positions the company to be a leader in the emerging sports betting marketplace where recent liberalization of casino regulations has opened a large new disruptive growth opportunity for mobile gaming and sports betting in certain states. This opportunity comes at an excellent time, where regional casinos have consolidated into fewer, more rational owners focused on maximizing returns. Furthermore, regional casino volumes have recovered at a faster-than-expected rate from pandemic lows, with the company pre-announcing better-than-expected revenue growth and profitability for the September quarter.

Immunomedics (IMMU), a leader in next generation antibody-drug conjugate technology for the treatment of hard-to-treat cancers, announced in mid-September that it had agreed to be acquired by Gilead for $88 per share, which represented a substantial 108% premium to IMMU’s previous closing price.


Ciena Corporation (CIEN) shares sold off after issuing lower-than-expected guidance for the rest of the calendar year, as the economic impact of the COVID-19 pandemic and diminished physical network and evaluation lab access is causing a slower rollout of optical technologies by large U.S. carriers and in India. Demand for communications bandwidth and next generation optical technologies remain secular growth opportunities, and CIEN’s broad-based new customer wins for its market-leading WaveLogic optical systems position the company to excel both secularly and when near-term industry spending resumes.

eHealth (EHTH) operates a direct-to-consumer, online health insurance marketplace that offers consumers a broad choice of insurance solutions from over 180 health insurance carriers. Its shares weakened in the quarter as investors grew concerned about a higher-than-expected level of customer churn and the potential negative effect on customer acquisition costs and the lifetime value of customer contracts. The company has prioritized growing enrollment over retention the last couple of years, but has recently taken corrective action to improve retention. Despite the higher churn, the company raised its full year guidance for sales and profitability and raised its expected five-year annual revenue growth rate to 27% from 23% previously. The company remains a prime beneficiary of the secular shift from offline agent assisted sales to online digital sales channels, where broader choice and the option to get coverage entirely through an online experience can potentially cut out the middle-man and lead to lower costs for the consumer and disruptive share gain for the company.


(As of 9/30/20) — The first nine months of 2020 have been an extremely volatile period for the market, and given the market’s quick rebound, despite a slower economy, lower earnings, political uncertainty and continued COVID-19 concerns, means a lot rests on the trajectory of earnings recovery in 2021. Volatility is likely to remain in place at least through the early November election, but it should ease once we get a clearer picture of fiscal stimulus plans and the policy biases of the next administration. Investors will then likely continue to focus on the trajectory of COVID-19 cases, the progression of additional treatments and vaccines, and ongoing company commentary on business trends.

We believe there will be a meaningful amount of data on vaccine and treatment options over the next few months that could be quite positive for those willing to look beyond near-term case numbers. Furthermore, regardless of who will be in the Oval Office, fiscal and monetary policy remain extremely accommodative worldwide with activity levels rebounding across countries and sectors. The economy is mending. Consumer and business confidence is rising too, as the world has found innovative ways to adapt, progress, and grow despite the 100-year pandemic in our midst.

While the election remains a wildcard, the market has taken Biden’s early lead and greater chances of a Democratic sweep in stride, contrary to prevailing wisdom that the market would suffer. Due to a reduction in growth opportunities in the last 6-9 nine months, we are mindful that investors may have bid up certain high growth stocks to unsustainable valuations, and we continue to focus on the downside risk relative to upside opportunity for stocks in the portfolio. The disparity in returns between Growth and Value has been extreme this year, and at some point, there could be a meaningful reversion to the mean, likely triggered by lower political uncertainty post-election and successful clinical results from a potential vaccine. Going forward, we think lower political uncertainty and a probable COVID-19 vaccine could steepen the yield curve and should be good for more economically-sensitive areas at the expense of over-priced growth stocks, and we are adjusting the portfolio accordingly.

We stand poised to capitalize when and where we see an opportunity to improve risk-adjusted return potential within the portfolio. Economic conditions may ebb and flow, but our focus is steady: to invest 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, durable growth, and sustained shareholder value creation. Successful innovation may often lead to 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 3 stars among 564 for the 3-year, 3 stars among 504 for the 5-year, and 4 stars among 383 Mid-Cap Growth funds for the 10-year period ending 12/31/20.

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. ©2021 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.