(FORTUNE Magazine) – John Kornitzer is one money manager without much interest in bears--or bulls, for that matter. When it comes to animals, the Vermont native only has eyes for bison. He's long had a weakness for drawings and statues of the brawny beasts. In 1989 the former portfolio manager for Texaco and GE founded his own investment company in Shawnee Mission, Kan., just a 30-minute drive from where the creatures roam freely on the prairie. And when he decided to launch a mutual fund company in 1994, he named his firm--surprise!--Buffalo Funds.

He has trampled the competition ever since. With eight funds and $5 billion in assets, Buffalo is a pip-squeak compared with Vanguard and Fidelity, which each manage at least $700 billion in more than 100 funds. But through March 31, according to Morningstar, Buffalo's funds together posted an asset-weighted, five-year annualized return of 11.6%. Vanguard and Fidelity, by contrast, delivered asset-weighted returns of 2.0% and --0.8%, respectively, during the same period. In fact, Buffalo beats nearly 90% of the 436 fund families with at least $5 million in assets. The firm's top performer is Buffalo Small Cap (BUFSX). With $1.9 billion in assets, the fund has gained an average of 13.6% a year over the past five years, beating 97% of its peers. (To keep Buffalo Small Cap from getting too big, the firm sells shares only to investors who purchase directly from Buffalo and not through supermarkets such as Charles Schwab OneSource.)

The secret of Buffalo's success lies in identifying --and betting heavily on--powerful economic trends that are driving growth in particular industries. The managers are currently playing about two dozen trends and are particularly bullish on demographic shifts, such as the aging of the baby-boomers and changing consumer habits, like the increasing use of digital electronics. Kornitzer and his team of 21 investment professionals--many of whom serve as analysts or co-managers on more than one fund--then look for stocks with valuations near five-year lows, and companies that have both strong cash flow and veteran management teams.

One demographic play that's a longtime favorite in the Buffalo Mid Cap (BUFMX) portfolio is Chico's (CHS, $29). A specialty retailer with more than 650 stores, Chico's sells casual clothing to women 35 and older. A flurry of new-store openings has boosted annual sales to nearly $1 billion, and the stock now trades for a lofty 35 times the past 12 months' earnings. But co-manager Bob Male believes the high valuation is warranted: He predicts Chico's will grow sales 25% annually over the next several years.

Pharmaceutical Product Development (PPDI, $46) benefits from outsourcing, another trend the managers like. With $840 million in sales, the firm conducts clinical trials for drugmakers. Facing skimpy pipelines and patent expirations, big pharmaceutical companies are increasingly outsourcing their clinical research to companies like PPDI, which can run trials in a more efficient and cost-effective manner. Shares sell for 28 times last year's earnings. But Buffalo Science & Technology (BUFTX) co-manager Clay Brethour sees PPDI's profits growing at a 20% annual clip.