In a class by himself, Fidelity fund manager William Danoff keeps performance humming

Contrafund manager tops S&P 500 (and his peers) over just about every time period

Jan 21, 2014 @ 11:41 am

By Jason Kephart

Fidelity Investments was home to the original star stock fund manager, Peter Lynch, and it may be home to one of the last.

Over the past few years, stock fund managers have struggled mightily to beat their indexes consistently, but you'd never know it by looking at the track record of Fidelity's William Danoff.

The 23-year veteran and manager of the flagship $111 billion Fidelity Contrafund (FCNTX) is beating the S&P 500 over the trailing one-, three-, five-, 10- and 15-year trailing time periods as of Jan. 17, according to Morningstar Inc.

Only two other solo portfolio managers can make the same claim, according to Lipper Inc.

What makes Mr. Danoff's feat even more remarkable is the sheer size of his fund. Bigger funds are supposed to have a harder time outperforming their benchmarks, after all.

“Larger funds have a higher degree of difficulty,” Mr. Danoff said in a rare interview last summer. “For me, it's the ability to make big bets — it's harder. My denominator is so big that it's not that easy to find really great stories at scale.”

The other funds to hold the perfecta over all those different time frames include the $2.3 billion Elfun Trusts Fund (ELFNX), managed by David Carlson, and the $22.8 billion T. Rowe Price Blue Chip Growth Fund, managed by Larry Puglia.

Today, Contrafund is the second-largest actively managed mutual fund, trailing only the $138.9 billion American Funds Growth Fund of America (AGTHX).

But unlike Contrafund, the Growth Fund of America has 12 portfolio managers, or 11 more than Contrafund, even though it's only a quarter bigger. Only one of those dozen managers has been at the fund longer than Mr. Danoff has held the reins at Contrafund.

The secret to Mr. Danoff's success is pretty simple: he works really, really hard.

He meets with around 20 companies a week as he searches for stocks with both best-in-breed management and a competitive edge. That combination leads to higher earnings per share and, over time, stock price follows earnings-per-share growth, according to Mr. Danoff.

Some help may be on the way for Mr. Danoff as Contrafund's assets continue to grow.

In September, John Roth, manager of the $3 billion Fidelity New Millennium Fund (FMILX), was named as a co-manager to Mr. Danoff's smaller fund, the $26 billion Fidelity Advisor New Insights Fund (FNIAX), at Mr. Danoff's request.

That led to speculation that Mr. Roth could be lining up to eventually make his way to Contrafund.

Mr. Danoff was not available for comment.

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