Fidelity Morningstar Key Metrics for Growing Companies
Morningstar Medalist Rating: Silver Process Pillar: Above Average Talent Pillar: High Parent Pillar: Above Average
Fidelity Growth Company’s FDGRX’s outstanding leadership remains a major advantage, but the fund will be vulnerable if chip vendor Nvidia NVDA, a key position here, fails to meet high market expectations.
Steve Weimer has run the fund for over 25 years, earning him a reputation as one of the industry’s longest-tenured large-scale growth managers as well as one of its most talented. . Despite the fund’s large asset base, Mr. Weimer executed the process without missing a beat, consistently outperforming his competitors in the fast-growing Morningstar category.
The fund has become increasingly defined by Nvidia, a major provider of graphics processing equipment and recently became one of the most valuable companies in the world. Since becoming a top holding in the portfolio in 2016, the stock has increased in market capitalization more than 100 times thanks to an impressive recent performance. Despite Mr. Weimer’s cash cut, the stock’s share in his portfolio has doubled over the past two years due to its outperformance, to about 16% of assets as of September 2024. This is a huge position size, both in absolute terms and compared to 11-13% of the same stock. Percentage of relevant significant growth index.
Stocks are riskier than other stocks. While the company is in excellent financial health, Morningstar’s equity analyst team says its current valuation hinges on the nascent and fast-growing artificial intelligence GPU end market, where the emergence of substitutes and increased competition are key. This is a natural concern. Nvidia’s business has historically tended to go through boom-and-bust cycles, which has shaken up its stock price.
However, this fund is by no means quiet. Mr. Weimer has long shown a willingness to embrace unprofitable companies, particularly in the biotech industry, that he believes have exceptional growth potential, and he has outperformed the Russell 1000 Growth Index (category benchmark) during market pullbacks. may be exposed to significant declines. Many of those up-and-coming prospects have disappeared over the years, but Mr. Weimer has shown a knack for finding big winners early and successfully investing them.
The fund’s large size is a disadvantage in that it limits Mr. Weimer’s ability to trade nimbly and hold large positions in his favorite stocks without exceeding his holding limits. Still, the fund, long closed to most new investors, remains an outlier.
Fidelity Growth Company: Performance Highlights
From Mr. Weimer taking the helm in January 1997 through November 2024, the fund returned more than 13.0% annually, far outpacing the Russell 1000 Growth Index’s 10.4% and the average large growth fund. Ta.
Mr. Weimer’s penchant for fast-growth stocks and his desire to hang on to relatively expensive fares increased the fund’s volatility relative to its peers and the benchmark, as measured by standard deviation. Still, the fund typically posts risk-adjusted results that beat its benchmark.
The funds’ relative performance has been surprisingly stable under Weimer. Since he joined the company, his monthly rolling returns over the three years have exceeded the bogeys 90% of the time and ranked in the top quartile of the category nearly as often.
This fund is typically sensitive to daily market gains and losses and tends to stumble more than other funds during drawdowns, but outperforms during upswings. This partly explains its success through November in 2023 and 2024, when its 36% return comfortably beat the index’s 32%. But a big part of that outperformance was the stellar gains in Nvidia, the strategy’s largest holding. A few other leading companies also helped, including Deckers Outdoor DECK and On Holding AG ONON.
Meanwhile, biotech stocks that outperform the strategy’s index have fared poorly over the past five years, with industry returns poor and small-cap biotechs like the ones this fund trades posting losses.
