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

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If you've been stuck searching for Large Cap Growth funds, consider Buffalo Discovery Fund (BUFTX - Free Report) as a possibility. BUFTX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

BUFTX is part of the Large Cap Growth section, and this segment boasts an array of other possible options. Large Cap Growth mutual funds purchase stakes in numerous large U.S. companies that are expected to develop and grow at a faster rate than other large-cap stocks. Companies are usually considered to be large-cap if their market capitalization is over $10 billion.

History of Fund/Manager

BUFTX finds itself in the Buffalo Funds family, based out of Shawnee Mission, KS. 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. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered 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. Compared to the category average of 11.5%, the standard deviation of BUFTX over the past three years is 10.3%. 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. BUFTX 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.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. BUFTX has a 5-year beta of 0.91, which means it 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. BUFTX has generated a positive alpha over the past five years of 1.74, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital 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%. BUFTX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $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, Buffalo Discovery 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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