Mutual Funds
Who's a Contrarian? Not Me!
The pilot of Fidelity's huge Contrafund excels by focusing on companies with visionary executives.
By Manuel Schiffres, Executive Editor
From Kiplinger's Personal Finance magazine, December 2005
Do you pay any attention to price, to valuation? No.
You let your winners run? Yes. The biggest mistake I make is to buy a stock at $10 and sell it at $14, or to miss a stock because I think it's too expensive. 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. When you think about it, if a stock goes from $10 to $100, who gives a hoot if you buy it at $10 or $12 or $15? If a stock goes from $10 to $15, it may feel like a big move at the time, but if it goes to $100, it doesn't matter whether you bought at $10 or at $15. When I took over Contrafund in 1990, we had a networking analyst who said, "Keep it simple. Just buy Cisco Systems." I said, "I can't buy it -- it's at 40 times earnings." I did buy some Cisco, but I never owned as much as I should have. It doesn't matter what you pay for a stock if the earnings growth is there.
And now? Now they're estimating $6 in '05 and from $8 to $10 next year. So the stock is selling at 30 times '06 estimates for a company that grew 98% in the past quarter. Google is going to be an industry leader, and who's to say that the estimates for next year don't go to $12 a share? The stock could go as high as $450. What I've learned over time is that when you have open-ended opportunities, you should try to stay with them.
You also have a big stake in Berkshire Hathaway. Warren Buffett is a very smart man, but I did have something of a contrarian thought when I invested in Berkshire. It was near the end of the Internet bubble and people were focusing just on the short term. I started thinking that when the bubble finally bursts, people would start reorienting their investments to the long term. I thought, Warren Buffett is the ultimate long-term investor. In addition, our analysts began anticipating an upturn in the insurance market.
Have you met Buffett? He doesn't meet with his shareholders one on one, but I've seen him at a couple of fund-raisers in New York and have talked with him for a short period of time. Just chitchat.
Berkshire, like your fund, has gotten awfully large. Yes, Buffett has a size issue, too. But I'm just trying to tap into the entrepreneurial spirit of this country. And whether you run a big fund or small fund, why wouldn't you want to invest in the best companies in the world?
Top Ten
Shown below are the biggest stock holdings of Fidelity Contrafund as of September 30.
|