Is Fidelity Contrafund (FCNTX) a Strong Mutual Fund Pick Right Now?

·4 min read

Large Cap Growth fund seekers should consider taking a look at Fidelity Contrafund (FCNTX). FCNTX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify FCNTX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.

History of Fund/Manager

Fidelity is responsible for FCNTX, and the company is based out of Boston, MA. The Fidelity Contrafund made its debut in May of 1967 and FCNTX has managed to accumulate roughly $122.89 billion in assets, as of the most recently available information. The fund's current manager, Will Danoff, has been in charge of the fund since September of 1990.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 21.71%, and is in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 20.81%, which places it in the middle third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, FCNTX's standard deviation comes in at 19.1%, compared to the category average of 17.5%. Over the past 5 years, the standard deviation of the fund is 15.84% compared to the category average of 14.49%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 0.98, so it is likely going to be as volatile as the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. Over the past 5 years, the fund has a positive alpha of 3.8. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.

Right now, 85.28% of this mutual fund's holdings are stocks, which have an average market capitalization of $464.61 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology

  2. Finance

  3. Retail Trade

Turnover is 32%, which means, on average, the fund makes fewer trades than its comparable peers.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FCNTX is a no load fund. It has an expense ratio of 0.85% compared to the category average of 1.02%. FCNTX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.

Bottom Line

Overall, Fidelity Contrafund ( FCNTX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Fidelity Contrafund ( FCNTX ) looks like a good potential choice for investors right now.

Don't stop here for your research on Large Cap Growth funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare FCNTX to its peers as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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