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Is Buffalo Discovery Fund (BUFTX) a Strong Mutual Fund Pick Right Now?
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Having trouble finding a Mid Cap Growth fund? Well, Buffalo Discovery Fund (BUFTX - Free Report) would not be a good potential starting point right now. BUFTX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that BUFTX is a Mid Cap Growth fund, and this area is also loaded with many different options. Companies are usually considered growth stocks when they consistently report notable sales and/or earnings growth. Thus, Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers.
History of Fund/Manager
Buffalo Funds is based in Shawnee Mission, KS, and is the manager of BUFTX. Buffalo Discovery Fund made its debut in April of 2001, and since then, BUFTX has accumulated about $1.60 billion in assets, per the most up-to-date date available. Clay Brethour is the fund's current manager and has held that role since January of 2004.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 11.34%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 14.46%, which places it in the middle third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, BUFTX's standard deviation comes in at 13.04%, compared to the category average of 14.71%. Over the past 5 years, the standard deviation of the fund is 12.68% compared to the category average of 14.22%. This makes the fund less volatile than its peers over the past half-decade.
Risk Factors
One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. BUFTX lost 47.94% in the most recent bear market and outperformed its peer group by 4%. This means that the fund could possibly be a better choice than its peers during a down market environment.
Nevertheless, investors should also note that the fund has a 5-year beta of 0.97, which means it is hypothetically as volatile as the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. BUFTX has generated a positive alpha over the past five years of 1.54, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Holdings
Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.
The mutual fund currently has 82.08% of its holdings in stocks, which have an average market capitalization of $29.44 billion. The fund has the heaviest exposure to the following market sectors:
Technology
Industrial Cyclical
With turnover at about 77%, this fund makes fewer trades than comparable funds.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, BUFTX is a no load fund. It has an expense ratio of 1.01% compared to the category average of 1.21%. BUFTX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.
Bottom Line
Overall, Buffalo Discovery Fund ( BUFTX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
Your research on the Mid Cap Growth segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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Is Buffalo Discovery Fund (BUFTX) a Strong Mutual Fund Pick Right Now?
Having trouble finding a Mid Cap Growth fund? Well, Buffalo Discovery Fund (BUFTX - Free Report) would not be a good potential starting point right now. BUFTX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that BUFTX is a Mid Cap Growth fund, and this area is also loaded with many different options. Companies are usually considered growth stocks when they consistently report notable sales and/or earnings growth. Thus, Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers.
History of Fund/Manager
Buffalo Funds is based in Shawnee Mission, KS, and is the manager of BUFTX. Buffalo Discovery Fund made its debut in April of 2001, and since then, BUFTX has accumulated about $1.60 billion in assets, per the most up-to-date date available. Clay Brethour is the fund's current manager and has held that role since January of 2004.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 11.34%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 14.46%, which places it in the middle third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, BUFTX's standard deviation comes in at 13.04%, compared to the category average of 14.71%. Over the past 5 years, the standard deviation of the fund is 12.68% compared to the category average of 14.22%. This makes the fund less volatile than its peers over the past half-decade.
Risk Factors
One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. BUFTX lost 47.94% in the most recent bear market and outperformed its peer group by 4%. This means that the fund could possibly be a better choice than its peers during a down market environment.
Nevertheless, investors should also note that the fund has a 5-year beta of 0.97, which means it is hypothetically as volatile as the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. BUFTX has generated a positive alpha over the past five years of 1.54, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Holdings
Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.
The mutual fund currently has 82.08% of its holdings in stocks, which have an average market capitalization of $29.44 billion. The fund has the heaviest exposure to the following market sectors:
- Technology
- Industrial Cyclical
With turnover at about 77%, this fund makes fewer trades than comparable funds.Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, BUFTX is a no load fund. It has an expense ratio of 1.01% compared to the category average of 1.21%. BUFTX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.
Bottom Line
Overall, Buffalo Discovery Fund ( BUFTX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
Your research on the Mid Cap Growth segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.