How Fidelity Blue Chip Growth Has Bounced Back

Key Morningstar Metrics for Fidelity Blue Chip Growth

• Morningstar Medalist Rating: Silver
• Process Pillar: Above Average
• People Pillar: Above Average
• Parent Pillar: Above Average

Through its recent busts and booms, Fidelity Blue Chip Growth FBGRX remains strong.

By mid-February 2024, the fund had regained all the ground it lost in 2022, its worst calendar year in recent memory, and had once again pulled ahead of the large-growth Morningstar Category average. Such was the result of the boomerang-like performance of some sizable holdings, including Nvidia NVDA, Meta Platforms META, and Uber UBER, all of which have outperformed since 2022′s start.

Volatility has long been the norm at this fund, which industry veteran Sonu Kalra has skillfully steered for 15 years. He builds a portfolio of 200-plus stocks that includes companies with higher-than-average expected growth rates but sometimes paltry earnings relative to their share prices, which often fluctuate significantly. These features position the fund to thrive when investors’ risk appetites increase but underperform when markets stumble or when value stocks—those with low valuation multiples and growth rates or high dividend yields—are in favor. It is an investment style that resembles other well-run Fidelity funds.

Kalra has demonstrated the long-term merit of the fund. Its success on his watch owes mostly to his knack for spotting high-potential up-and-comers, such as Crocs CROX and Celsius Holdings CELH, which the mutual fund has ridden over the past decade to spectacular gains. It has also benefited enormously from its industry bets, notably on semiconductors, which at 17% of assets recently was among the category’s biggest allocations.

Across all accounts, the fund’s present size poses challenges. Its more than $80 billion asset base, one of the world’s largest for an actively managed large-growth fund, makes it difficult to invest meaningfully in the smaller-cap prospects that have driven much of the fund’s past success. Still, that doesn’t necessarily relegate the fund to mediocrity. Kalra’s position moves tend to be gradual, and support from Fidelity’s deep analyst bench helps him oversee the fund’s sprawling portfolio.

Fidelity Blue Chip Growth: Performance Highlights

The fund has posted strong albeit volatile results under Kalra. From his July 2009 start through January 2024, its 18.0% annualized gain beat the Russell 1000 Growth Index by 1.5 percentage points and outpaced 95% of large-growth category peers, which averaged a 13.7% annualized return. The fund’s excess returns have also been mostly consistent: Over the 140 monthly rolling three-year periods on Kalra’s watch, the fund outperformed the index three fourths of the time and nearly always landed in the category’s top third. But the fund’s above-average volatility, as measured by standard deviation, dulled its risk-adjusted results. Kalra’s tenure has coincided with a mostly rising market led by stocks with relatively high price multiples and rapid growth expectations, which has supplied stylistic tailwinds to the fund’s returns over the long haul.

The fund’s style partly explains its dismal results in 2022 as inflation and interest rates soared and high-growth stocks fared especially poorly. Such underperformance is typical for this fund, which has seldom offered downside protection or outperformance when value stocks have been in favor. It has instead excelled during market rallies where risk-taking on companies with high price multiples, highly uncertain futures, or cyclicality is handsomely rewarded.

The fund’s huge allocation to semiconductors was a big help in 2023 as real enthusiasm surrounding artificial intelligence powered the industry’s tremendous gains. Its overweightings in Meta, Uber, and Salesforce CRM also paid off.