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

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Large Cap Growth fund seekers should not consider taking a look at Fidelity Contrafund (FCNTX - Free Report) at this time. FCNTX bears a Zacks Mutual Fund Rank of 4 (Sell), 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 based in Boston, MA, and is the manager of FCNTX. Fidelity Contrafund debuted in May of 1967. Since then, FCNTX has accumulated assets of about $82.70 billion, according to the most recently available information. The fund is currently managed by Will Danoff who has been in charge of the fund since September of 1990.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 9.3%, and it sits in the top 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 10.16%, which places it in the top 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. The standard deviation of FCNTX over the past three years is 12.71% compared to the category average of 11.06%. The fund's standard deviation over the past 5 years is 11.94% compared to the category average of 10.83%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. FCNTX lost 46.34% in the most recent bear market and outperformed its peer group by 2.5%. This means that the fund could possibly be a better choice than its peers during a down market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. FCNTX has a 5-year beta of 0.99, which means it is likely to be as volatile as the market average. 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. With a positive alpha of 0.97, 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.

This fund is currently holding about 92.52% stock in stocks, which have an average market capitalization of $267.35 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance
  3. Other
Turnover is about 34%, so those in charge of the fund make fewer trades than its comparable peers.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FCNTX is a no load fund. It has an expense ratio of 0.84% compared to the category average of 1.05%. Looking at the fund from a cost perspective, FCNTX is actually cheaper than its peers.

This fund requires a minimum initial investment of $2,500, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity Contrafund ( FCNTX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

Your research on the Large Cap Growth segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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