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MiB: Beating the S&P 500 for 30 years

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MiB: Beating the S&P 500 for 30 years

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Will Danoff is an outlier: The manager of Fidelity‘s storied Contrafund is the sole person in charge of the $139 billion large-cap growth fund, making the fund largest single-manager run fund in the country.

But its much more than that: During his 30-year tenure, the Fidelity Contrafund has racked up outstanding performance data: He has outperformed the S&P 500 index in 100% of rolling 10-year time periods. Those returns beat the market by an average of 3.21 percentage points per year over those three decades.

He once asked Warren Buffett what advice would you give him as a manager of $100 billion dollars. Buffett’s reply: “When you have a good idea, bet big.”

When Danoff returned to the office, he reviewed the 600 stocks in Contrafund, and decided the bottom 300, were either “Up or Out;” while the top 50 stocks needed to be bigger positions or sold. This was not dissimilar to what Peter Lynch had told him “The best stocks are probably stocks you already own, you need to bet bigger.”

If you like a stock as an investment, he says you should to own it in size, with more of a concentrated portfolio. One of the great lessons over 30 years, that even if a stock has doubled or tripled, you have not missed it.

Example: He shares the story of a presentation by AskJeeves’ new CEO discussing natural language search. Danoff asked him what Google was doing so well. The GOOG competitor explained why Google’s algorithm was so vastly superior. Danoff was sold. He went back to his office, did even more research into Google, and was a big buyer during the August 2004 IPO of Google, adding more in the years afterward.

Danoff explains why “Fidelity is a great place to manage money;” He has worked with Peter Lynch, Joel Tillinghast, Jeffrey Vinik, Ned Johnson, Gerald Tsai, and many others.

A list of his favorite books are here; A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotifyOvercastGoogleBloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Doug DeMuro, one of the most popular online car reviewers. His YouTube channel has 3.7 million subscribers; his videos have been streamed 1.1 billion times, with each video averaging 2 million views. He conceived/co-founded the auction site Cars & Bids. He is he author of two books: “Plays With Cars,” and “Bumper to Bumper.”

 

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