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Contrafund: Exceptional Record
10/09/2015 9:00 am EST
This recommendation focuses on 'best of breed' companies—those with a strong competitive position, high returns on capital, solid free cash flow generation, and management teams deemed “stewards of shareholder capital”—explains Genia Turnanova in The Complete Investor.
In the six-plus years that we’ve been recommending Fidelity Contrafund (FCNTX) as a core large-cap growth fund, it has been a decent—if not spectacular—performer, with a five-year record that places it in the top 41st%ile for the category.
Earlier this year, as a result of some outflows from the fund, Morningstar featured Contrafund in a “Buy the Unloved 2015” article.
While noting that large-cap growth was currently unpopular with fund investors, Morningstar found nothing to complain about with Contrafund.
Although the silver rating indicates that Morningstar expects Contrafund to remain in the middle of the pack, the strong four-star rating attests to the fund’s long-term excellence.
We continue to recommend Contrafund as our large-growth pick. Despite the recent absence of home runs—the fund has hovered in the middle of the category in both 2013 (top 46%) and 2014 (top 56%)— it’s a reliable way to own big-cap.
The fund’s lead manager, William Danoff, at the helm for nearly 25 years, has achieved an exceptional long-term record.
Contrafund ranks in the top 1st percentile for the past 15-year period and top 15th percentile for the last ten years. We don’t see the fund’s huge asset base of more than $113 billion as a bar to Danoff’s continued ability to maneuver.
Just 1% of its assets are in cash. As of the most recently available information, Berkshire Hathaway (BRK-B) was the biggest position, followed by Apple (AAPL), Facebook (FB), Wells Fargo (WFC), and Biogen (BIIB), together accounting for about 20% of total assets.
The top ten positions represent around 29% of the overall portfolio, and with 340 stocks, the fund is well diversified. Contrafund’s long-term approach means below-average turnover of 45%, compared to 70% for the category.
Contrafund remains a large-cap growth pick.
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