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Is Buffalo Discovery Fund (BUFTX) a Strong Mutual Fund Pick Right Now?

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Having trouble finding a Large Cap Growth fund? Buffalo Discovery Fund (BUFTX - Free Report) is a potential starting point. BUFTX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify BUFTX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.

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 $1.68 billion in assets, per the most up-to-date date available. The fund's current manager, a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 16.16%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 11.84%, which places it in the top 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. The standard deviation of BUFTX over the past three years is 10.3% compared to the category average of 11.5%. The standard deviation of the fund over the past 5 years is 10.65% compared to the category average of 11.46%. 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. In BUFTX's case, the fund lost 47.94% in the most recent bear market and outperformed its peer group by 3.4%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Nevertheless, with a 5-year beta of 0.91, the fund is likely to be less volatile than the market average. 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. The fund has produced a positive alpha over the past 5 years of 1.74, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

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 1.20%. From a cost perspective, BUFTX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment needs to be at $100.

Bottom Line

Overall, Buffalo Discovery Fund has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Want even more information about BUFTX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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