Quick Facts
Inception Date:4/16/20017/1/2019
Expense Ratio:1.02%0.87%
Total Net Assets:$1.78 Billion  (3/31/21)
Category:Mid Cap Growth
Benchmark:Morningstar U.S. Mid Growth
Related Material:
   Fund Fact Sheet Q1 2021
   PM Commentary Q1 2021
   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.


Management of the Buffalo Discovery Fund integrates ESG (Environmental, Social, and Governance) related factors into the investment decision making process. ESG-related factors material to the risk and return of investments are explicitly considered, alongside traditional financial factors, when making investment decisions.

Learn More About ESG Integration


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 547 Midcap Growth funds as of 5/31/21.

Investment Style

Performance (%)

As of 5/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO DISCOVERY FUND - Investor0.684.2037.2818.0217.6314.5012.5610.2710.65
BUFFALO DISCOVERY FUND - Institutional0.714.2537.4718.2017.8014.6812.7310.4410.81
Morningstar U.S. Mid Growth Index0.912.3438.5622.7920.7414.4711.799.389.93
Morningstar Mid-Cap Growth Category1.656.2446.4019.8019.0513.4311.069.358.68
As of 3/31/213 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
BUFFALO DISCOVERY FUND - Investor2.702.7067.4918.6417.8614.8212.0310.66
BUFFALO DISCOVERY FUND - Institutional2.762.7667.7518.8318.0515.0012.2010.83
Morningstar U.S. Mid Growth Index-1.62-1.6273.2622.3720.5914.3211.169.80
Morningstar Mid-Cap Growth Category3.963.9681.9520.2919.1613.3810.478.62
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 3/31/21)
Upside Capture76.81
Downside Capture88.72
Sharpe Ratio0.89
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 3/31/21) 
# of Holdings82
Median Market Cap$19.15 B
Weighted Average Market Cap$22.28 B
3-Yr Annualized Turnover Ratio94.71%
% of Holdings with Free Cash Flow75.31%
Active Share75.05%
Top 10 Holdings
HoldingTickerSector% of Net
Penn National GamingPENNConsumer Discretionary2.11%
Take-Two InteractiveTTWOCommunications1.78%
IHS MarkitINFOIndustrials1.78%
Global PaymentsGPNIndustrials1.71%
ExpediaEXPEConsumer Discretionary1.70%
As of 12/31/20. 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 3/31/21. 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 3/31/21. 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 3/31/21) — Equity markets continued to move higher in the 1st quarter of 2021, with the S&P 500 Index returning 6.17%. The period was marked by outperformance of value stocks as the market rotation that began in the last quarter of 2020 became even more pronounced. The vaccination rollout, combined with prospects for more fiscal stimulus, bolstered optimism towards companies that could benefit from the economy reopening. Additionally, an 80+ basis point move higher in the 10-Year U.S. Treasury yield during the quarter left sentiment towards growth stocks relatively more subdued.

The broad market Russell 3000 Index advanced 6.35% in the quarter. Value outperformed growth for the second straight quarter, with the Russell 3000 Value Index up 11.89% compared to the Russell 3000 Growth Index returning 1.19%. Relative performance was inversely-correlated with market cap size in the quarter, with the Russell Micro Cap Index up 23.89%, the small cap Russell 2000 Index up 12.70%, the Russell Midcap Index up 8.14%, and the large cap Russell 1000 Index returning 5.91%. The more cyclically-sensitive Energy, Financial, and Industrial sectors performed best in the quarter. Consumer Staples, Information Technology, and Utilities were the bottom three performing sectors. All sectors produced positive returns.


(As of 3/31/21) — The Buffalo Discovery Fund (BUFTX) gained 2.70% during the quarter, outperforming the Morningstar U.S. Mid Growth Index’s decline of 1.62%. The Fund outperformed the Index in all of the major sectors that comprise the bulk of the benchmark – Consumer Discretionary, Healthcare, Technology, and Industrials – but lagged slightly in Financials and Telecommunications Services. Stock selection drove all of the outperformance while sector allocation was a slight drag on relative performance. The overall rotation to “value” from “growth” led to a decline in the Index in traditional growth areas of Consumer Discretionary, Healthcare, and Technology. Despite this backdrop, the Fund managed to post positive returns in all of these sectors, as our valuation discipline and focus on downside protection kept us out of most of the high growth stocks that were hit hard by the rotation.


The top contributor for the portfolio in the 1st quarter was Ligand Pharmaceutical, which gained 53%. A highly shorted stock coming into the quarter, Ligand surged on a short squeeze alongside other highly shorted stocks as it was disclosed that troubled hedge fund Melvin Capital owned put options on Ligand as well as other companies like GameStop and Bed Bath & Beyond. We had been quite surprised that the short interest remained stubbornly high throughout 2020 despite strong fundamentals that even improved during the COVID outbreak, as Ligand’s product Captisol is in Gilead’s drug Remdisivir to improve its tolerability, which led to a windfall in revenues and cash flow for Ligand. We believe there is additional upside potential to come from Ligand as its lead drug discovery platform, OmniAb, continued to see licensees get closer to commercialization, which could generate high margin royalty revenue for Ligand.

Generac was the next largest contributor during the quarter. Generac continues to gain investor attention as demand for its home standby generators likely increased massively during the Texas power crisis in February 2021. When combined with rolling blackouts in California, increased frequency and intensity of hurricanes, and their entry into the home battery backup market, it is easy to see why demand for Generac’s products has increased immensely and the stock has responded.


Tenable, a security software company, was the largest detractor to performance in the quarter. The stock rallied in the December 2020 quarter as the high profile SolarWinds hack caused investors to bid up many cybersecurity stocks in anticipation of an acceleration in revenue growth. When the company gave 2021 revenue guidance that assumed no incremental increase in revenues due to the hack, it was considered a disappointment by investors and the stock gave back all of the December gains. We believe management is smartly setting guidance that allows for them to beat consensus and potentially raise guidance through the year, and the pull back in the stock is an opportunity for long term investors.


(As of 3/31/21) — The outlook remains generally positive as robust monetary and fiscal stimulus provides an inviting backdrop for investors. While a quick rise in interest rates has given some pause on growth stocks and facilitated a catchup trade for value stocks, we do not believe the prospect of a low single digit yield on a ten-year government bond is going to provide a suitable enough return for investors to begin to abandon equities.

2021 should continue to benefit from a recovering economy with above average gross domestic product (GDP) growth, but as we return to pre-COVID economic levels, we believe economic growth likely gets stymied, as higher federal debt levels and higher taxes eventually slow the economy, which may again put premium multiples on companies that can grow faster than the market. While there is also chatter about inflation ruining the party, we believe we are still a ways away from seeing enough inflation sustaining at a level that gets the Federal Reserve concerned enough to take action on interest rates. Meanwhile COVID variants and the durability of responses to vaccinations remain a wildcard, but the rapid dissemination of vaccines by the new administration is definitely a positive for economic recovery and a return to normalcy. Higher tax rates will be required to pay for additional fiscal stimulus and could take a small bite out of earnings growth, but we do not believe there is enough political capital or will to raise taxes high enough to choke the market.

We continue to tighten up the portfolio and focus on our favorite ideas – there are now 82 positions in the Fund. We have continued the process we started last year in getting a little more cyclical exposure in the portfolio and remain ever mindful of valuations as there are still signs of excess in areas like high growth software. We have also steadily added companies at the lower end of the market cap range as smaller companies generally outperform coming out of periods of recession. They are also trading at attractive valuation and have solid operating leverage. As always, we continue to focus on premier, innovative companies that benefit from long-term trends and trade at attractive valuations, and we appreciate your continued support.

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.

7 Buffalo Funds Named to IBD Best Mutual Funds 2021 List

Seven Buffalo Funds were named to Investor’s Business Daily Best Mutual Funds 2021 list, including the Best U.S. Diversified, Growth, Large Cap, Mid Cap, Small Cap, International, and U.S. Taxable Bond Fund categories.


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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 547 for the 3-year, 3 stars among 490 for the 5-year, and 4 stars among 380 Mid-Cap Growth funds for the 10-year period ending 5/31/21.

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.