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

If you've been stuck searching for Mutual Fund Equity Report funds, you might want to consider passing on by Buffalo Discovery Investor (BUFTX) as a possibility. BUFTX possesses a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

History of Fund/Manager

Buffalo Funds is responsible for BUFTX, and the company is based out of Shawnee Mission, KS. Since Buffalo Discovery Investor made its debut in April of 2001, BUFTX has garnered more than $826.21 million in assets. Dave Carlsen is the fund's current manager and has held that role since January of 2004.

Performance

Of course, investors look for strong performance in funds. BUFTX has a 5-year annualized total return of 7.67% and is in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.39%, which places it in the bottom 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. BUFTX's standard deviation over the past three years is 22.49% compared to the category average of 20%. The fund's standard deviation over the past 5 years is 19.9% compared to the category average of 17.75%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.03, which means it is hypothetically as volatile as the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. BUFTX has generated a negative alpha over the past five years of -3.73, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining 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.

This fund is currently holding about 97.27% stock in stocks, with an average market capitalization of $21.65 billion. Turnover is 41%, which means, on average, the fund makes more traders than comparable funds in a given year.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, BUFTX is a no load fund. It has an expense ratio of 1% compared to the category average of 1.14%. Looking at the fund from a cost perspective, BUFTX is actually cheaper than its peers.

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 Investor ( BUFTX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, Buffalo Discovery Investor ( BUFTX ) looks like a somewhat weak choice for investors right now.

Your research on the Mutual Fund Equity Report 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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