Better Know a Stock Picker

Welcome, Fools, to part 48 of our several-thousand-part series, "Better Know a Stock Picker," which is loosely, but not too loosely, based on Stephen Colbert's "Better Know a District" from The Colbert Report.

Like Stephen and his thorough investigations into America's congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?

Buffalo Science & Technology (BUFTX)

Expense ratio

1.03%

Fund size

$152.7 million

1-year return

19.15%

5-year return

13.24%

10-year return

N/A

Source: Buffalo Funds. Returns as of 5/31/07.

Top 5 holdings

Company

% of Assets

Cabot Microelectronics (NASDAQ:CCMP)

2.64%

Hewitt Associates (NYSE:HEW)

2.64%

Jabil Circuit (NYSE:JBL)

2.41%

IMS Health (NYSE:RX)

2.02%

LifeCell (NASDAQ:LIFC)

1.95%

Source: Morningstar. As of 3/31/07.

Meet Clay Brethour, Elizabeth Jones, and Dave Carlsen
The fightin' team at Buffalo Science & Technology is led by the triumphant triumvirate of Clay Brethour, Elizabeth Jones, and Dave Carlsen. Though they haven't been together long -- Carlsen joined the team in 2004 -- they're up on the S&P 500 by about 1% per year over each of the past three years. And that's while running a tech fund, one of the worst sectors to be in lately.

Actually, it's worse than that. Buffalo Science & Technology opened for business in April 2001. I don't need to tell you what happened a few months later.

Certainly, investors who lost money during those dark days have nothing to complain about when compared with those who lost loved ones in the attacks on New York and Washington, D.C. But they still paid a price: Buffalo Science & Technology declined 39% in 2002.

Brethour could easily have quit in the aftermath. Thankfully, he didn't, and he, Jones, and Carlsen have been sticking it to the stockinistas since. Indeed, the members of this flagaphile trio have outperformed their peers in every year since 2003, when Buffalo Science & Technology produced a breathtaking 62.7% return. Eat that, Wall Street.

How they invest
What's their secret? Brethour, Jones, and Carlsen take a very broad view of technology. Quoting from their most recent letter to shareholders:

We, like the Merriam-Webster Collegiate Encyclopedia, believe that technology is the "application of knowledge to the practical aims of human life or to changing and manipulating the human environment. Technology includes the use of materials, tools, techniques, and sources of power to make life easier or more pleasant and work more productive." ... Our peers tend to have a higher concentration of information technology in their Science and Technology funds.

Translation: We'll zig when others zag.

Good idea. Superstantial investors rarely win by following the crowd. But diverging from the market's well-worn paths can also be risky. Unless, that is, you have some sort of edge in processing information. At Buffalo Science & Technology, Jones offers that edge. She's a former doctor whose ability to analyze biotechnology is influenced by eight years of hands-on training.

Is this fund for you?
Motley Fool Champion Funds advisor Shannon Zimmerman rarely recommends sector funds, so I'm somewhat reluctant to give a thumbs-up to Buffalo Science & Technology. What convinces me, though, is Shannon's endorsement. He named it as one of his "funds to watch" in the April 2007 issue of Champion Funds. Quoting:

With nearly 70 names -- not to mention a portfolio that includes health-care companies like Amylin Pharmaceuticals (Nasdaq: AMLN  ) and MedImmune (Nasdaq: MEDI  ) alongside purer tech plays -- this fund does for tech what our other sector recommendations have done for real estate and health care: It provides a high-caliber way to devote a slice of your personalized pie chart to an area of the market that appears poised for outperformance.

Want more ideas? Get 30 days of free access to Champion Fundsright now. Shannon's picks are up 14% on their respective benchmarks as I write, and there's never an obligation to subscribe.

Till next week, fund nation. Good night.

For more Foolish coverage of sector funds:

  • For Ed Owens, healthy bodies make for healthy returns.

Fool contributor Tim Beyers, who is ranked 5,240 out of more than 30,800 rated investors in our Motley Fool CAPS investor-intelligence database, is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Tim's portfolio holdings can be found at his Fool profile. His thoughts on mutual funds, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy is always championship-caliber.


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