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

If investors are looking at the Large Cap Growth fund category, Fidelity Contrafund (FCNTX) could be a potential option. FCNTX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various 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 $153.33 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 18%, 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 28.37%, which places it in the top third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. FCNTX's standard deviation over the past three years is 16.38% compared to the category average of 16.89%. The fund's standard deviation over the past 5 years is 17.84% compared to the category average of 16.75%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 1.04, so investors should note that it is hypothetically more volatile than 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. The fund has produced a positive alpha over the past 5 years of 0.97, which shows that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Examining 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 principally on equities that are traded in the United States.

As of the last filing date, the mutual fund has 76.03% of its assets in stocks, with an average market capitalization of $651.19 billion. The fund has the heaviest exposure to the following market sectors:

• Finance
• Technology
• Retail Trade

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FCNTX is a no load fund. It has an expense ratio of 0.63% compared to the category average of 0.94%. FCNTX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

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

This could just be the start of your research on FCNTXin the Large Cap Growth category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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This article originally published on Zacks Investment Research (zacks.com).

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