Sector pick: Technology
Clay Brethour, co-manager of the $430 million Buffalo Discovery Fund ( -- up 10.6% a year on average for the past 10 years, vs. 7.5% for its category, according to Morningstar -- likes to think about innovation broadly rather than about technology per se. )
Case in point: Align Technology, the $550 million (in revenue) maker of Invisalign invisible braces, which have transformed orthodontics. The company's clear aligner trays, which pop in and out like retainers, first became popular with adults as an alternative to the despised traditional metal braces. Now the company is making inroads in the teenage market, which represents three-quarters of the 2.6 million orthodontics cases begun each year. (Shares have fallen 28% since a quarterly decline in shipments to adults, but Brethour isn't worried because of the potential he sees in the teen market.) He thinks the company, a top holding of his fund, can continue to increase revenue about 15% or so a year, and expand profits at an even faster rate, for the next five years. As Brethour puts it, "If you talk to orthodontists and dentists, this is the only product where patients come in and ask for it by brand."
Beware of munis priced at bubble levels. They'll always pop in the end.