Welcome, Fools, to part 25 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?
|
Fidelity Contrafund (FCNTX) | |
|---|---|
|
Expense Ratio |
0.90% |
|
Fund Size |
$67.1 billion in assets |
|
1-Year Return |
14.51% |
|
5-Year Return |
12.19% |
|
10-Year Return |
11.27% |
Top 5 Holdings
|
Company |
% of Assets |
|---|---|
|
|
3.74% |
|
Genentech (NYSE:DNA) |
2.39% |
|
Berkshire Hathaway (NYSE:BRK-A) |
2.26% |
|
EnCana (NYSE:ECA) |
2.21% |
|
Schlumberger (NYSE:SLB) |
1.65% |
Meet Will Danoff
The fightin' team at the Fidelity Contrafund is led by Will Danoff, who has been at the wheel since Peter Lynch retired from Fidelity Magellan (FUND:FMAGX) in 1990. And in that time, he's up 572% versus 363% for the S&P 500 (according to Morningstar).
You'd think such a record would be the purview of a numbers guy, but that's not Danoff. Despite a high-grade pedigree that includes training at both Harvard and the Wharton School, Danoff says he likes to keep investing simple. "My strategy is to own the very best companies," Danoff told Kiplinger's in a December 2005 interview.
It's a superstantial approach that apparently makes him smile. For example, last summer, BusinessWeek reported that Danoff, now in his mid-40s, keeps an office full of doodads adorned with smiley faces. Crazy, you say? Hey, pal, you'd be smiling, too, if three of your top five holdings were up by double digits this year, led by energy maven Schlumberger, which has advanced by more than 35% since January.
He's also had the guts to add to double-digit winners America Movil (NYSE:AMX), up 49% this year, and Hewlett-Packard, which is up 40% during 2006. Eat that, Wall Street.
How he invests
So, what's Danoff's secret? Talking to lots and lots of people. As he told Kiplinger's, "I love to call companies and talk with executives and managers and ask what they do, how they generate revenue, and where they see opportunities. On average, I probably see five companies a day."
Wow. I mean, is there any time left for number-crunching? Probably not. Luckily, Danoff uses more subjective criteria to evaluate the quality of his holdings. "Value investors say, 'You have to buy a stock right.' I want to buy something where I don't have to buy it right and I don't have to worry about selling it right. ... It doesn't matter what you pay for a stock if the earnings growth is there," Danoff told Kiplinger's.
That takes guts. But that's the way growth investing is, which is also why Danoff made no apologies to Kiplinger's when asked about making Google his top holding. "What I've learned is that when you have open-ended opportunities, you should try to stay with them."
Is this fund for you?
So, can Danoff deliver like Peter Lynch? His philosophy sure is similar. Like Danoff, Lynch doubled down on his best ideas and let his winners run as far and as fast as they could. That's why Magellan investors collected $500 million worth of gains from Fannie Mae (NYSE:FNM) during Lynch's reign.
What's more, Motley Fool Champion Funds lead analyst Shannon Zimmerman speaks highly of the Contrafund under Danoff's leadership; he calls it one of the four best in the Fidelity family of funds. That, plus a minuscule 0.90% expense ratio, ought to be enough to get any Fool interested in purchasing a stake. Too bad we can't. Contrafund remains closed to all new investors.
But don't let that discourage you. Growth gurus such as Danoff's Fidelity colleague Harry Lange continue to do well, and there are plenty of top-notch choices available in the category. One mid-cap fund, which joined the Champion Funds portfolio in the January 2005 issue, charges only 1.08% in annual expenses and is up on its index by more than 15%. (It's also one of several winners for Shannon. Click here to get 30 days of free access to the entire portfolio.)
And that's this week's profile. See you back here next week, fund nation. Good night.
Think you can't beat the market with funds? Think again! The selections in Shannon Zimmerman's Motley Fool Champion Funds portfolio are up an average of 25% vs. just 16% for their comparable benchmarks. Ask us for an all-access pass to get an unfettered look at all of Shannon's picks, manager interviews, and model portfolios. Go ahead. It's free for 30 days, and there's no obligation to buy.
Fool contributor Tim Beyers, ranked 2,434 out of 13,181 in Motley Fool CAPS, is a regular viewer of The Colbert Report. (Stay the course.) Tim owns shares of Berkshire Hathaway, which, along with Fannie Mae, is a Motley Fool Inside Value selection. Get the skinny on all of the stocks in Tim's portfolio by checking his Fool profile. The Motley Fool's disclosure policy is always championship caliber.
