Sifting Through Fidelity's Large-Cap Medalists

Fidelity's fund lineup can be difficult to navigate. Investors looking for a U.S. large-cap equity fund can choose from 30 no-load funds, not to mention the slew of advisor-sold funds whose names, managers, and portfolios don't always neatly match up with the direct-sold versions.

Below we'll look at Fidelity's large-cap Morningstar Medalist funds, which are predominantly run by a few key managers. Most of these top managers run a lot of money, as their strong track records have attracted inflows or additional fund assignments. Unfortunately, Fidelity doesn't have the best history of closing funds in a timely fashion--if at all. That tempers enthusiasm for some of these picks, which have great pedigrees but limited flexibility because of size. As a result, none of Fidelity's actively managed large-cap equity funds receives a Gold Morningstar Analyst Rating. On the passive side, Fidelity Spartan 500 Index and Fidelity Spartan Total Market Index have earned Gold ratings because of their low expense ratios.

Fidelity Contrafund (FCNTX) (Silver), Fidelity Advisor New Insights (FNIAX) (Silver), Fidelity New Millennium (FMILX) (Bronze)
Will Danoff's success at Fidelity Contrafund over the past 23 years seems implausible given the huge asset base he oversees. As of February 2014, Contrafund had $114 billion in assets, and Fidelity Advisor New Insights--a fund with much overlap--had $27 billion. He's run significant sums for a while and has accommodated the strategy's growing size by holding fewer small- and mid-cap names and trading less than he did in his early days. Even so, the funds are not benchmark-huggers and have produced peer- and benchmark-beating records.

Danoff is judged against the S&P 500 Index, but he runs more of a growth-leaning strategy, searching for firms with improving earnings and solid execution. Companies with decelerating earnings aren't tolerated, yet he supplements growth picks with steadier fare such as Berkshire Hathaway (BRK.A) (BRK.B). Over time, Contrafund has been much less volatile than the average large-growth fund and has held up better in market declines.

Despite beating the S&P 500 by more than 3 percentage points annualized since Danoff's 1990 start, Contrafund isn't rated Gold because of its size. Another Danoff-run fund hints that asset bloat may be handicapping Contrafund. The $6 billion Fidelity Series Opportunistic Insights (FVWSX), a fund created for Danoff in late 2012 for exclusive use in Fidelity's target-date series, makes bigger bets and holds more small- and mid-cap stocks. So far, Opportunistic Insights is beating Contrafund by more than 4 percentage points annualized through March, thanks, in part, to its greater flexibility.

With Danoff running more money than ever before at those funds, he recently chose a comanager at the smaller Advisor New Insights. John Roth, who runs two of his own funds, including Bronze-rated Fidelity New Millennium, may be Danoff's heir apparent if he does well at Advisor New Insights. Roth, who joined Danoff in September 2013, draws on ideas from his other charge, Bronze-rated Fidelity Mid-Cap Stock (FMCSX). His style isn't quite as growth-leaning as Danoff's; Roth's funds have traded at lower valuations, sported higher debt/capital ratios, owned fewer consumer discretionary names, and held more industrials. So far, Roth has influenced Advisor New Insights by adding names like Microsoft (MSFT).

Roth may give Danoff a little relief at Advisor New Insights, but Danoff still manages more than $100 billion. It also remains to be seen how Roth, who runs more than $12 billion across his funds, handles capacity as he plays a bigger role at Advisor New Insights.

Fidelity Growth Company (FDGRX) (Silver) and Fidelity Advisor Growth Opportunities (FAGOX) (Neutral)
Steve Wymer goes a little further out on the growth spectrum than Danoff and tends to run with a lower average market cap. He holds a bigger slug of technology and health-care stocks, with a sizable biotechnology stake. Some of his biggest winners in recent years are shares he bought years ago when they were much smaller, including Regeneron (REGN) and Salesforce.com (CRM). Wymer has beaten large-growth peers during his tenure, albeit with greater volatility.

Wymer doesn't have the capacity constraints Danoff does: The $47 billion Fidelity Growth Company is closed to new investors. Still, that's a hefty sum, considering he likes lower-market-cap stocks. He's also seen inflows into the $3.7 billion Fidelity Advisor Growth Opportunities, which Gopal Reddy joined as comanager in October 2012 and is poised to take over in January 2015, as was recently announced. Unlike Roth, Reddy doesn't run another diversified fund, so his influence here is a little harder to decipher. He knows Wymer's process, having worked closely with him as an analyst, and he should benefit from a long transition period. However, the fund's Silver rating was largely due to Wymer's influence and track record, so Fidelity Advisor Growth Opportunities was recently downgraded to Neutral until there's evidence Reddy can build on Wymer's success. The manager change is a positive for Fidelity Growth Company investors since Wymer will now be able to focus all of his attention there, though it's still a massive fund.

Fidelity Large Cap Stock (FLCSX) (Silver), Fidelity Advisor Large Cap (FALAX) (Silver), Fidelity Growth & Income (FGRIX) (Bronze), Fidelity Advisor Growth & Income (FGIRX) (Bronze), Fidelity Advisor Capital Development (FDETX) (Silver)
Matt Fruhan is a rising star at Fidelity. After making the rounds at various sector funds, he took over Fidelity Large Cap Stock and its Advisor counterpart in 2005. Success there led to his appointment at Fidelity Advisor Mega Cap Stock (FGRTX) in 2009 (which Morningstar doesn't cover), Fidelity Growth & Income and its Advisor version in early 2011, and finally Fidelity Advisor Capital Development in December 2013.

Fruhan, who runs more than $28 billion, likes to buy long-term growers when they hit short-term bumps and cyclical growers near earnings troughs. As a result, Fruhan's funds can tilt between growth and value, depending on where he's finding opportunities, and often land in the large-blend category. His more valuation-sensitive approach distinguishes him from Fidelity's other top managers. For instance, Fruhan owns less Facebook (FB) and Google (GOOG) than many of his growth-leaning Fidelity colleagues; Fruhan also has favored financials for the past several years.

Fruhan's record at Fidelity Large Cap Stock earned it and its Advisor clone an Analyst Rating upgrade to Silver from Bronze in 2013. When Fruhan took over Fidelity Advisor Capital Development in 2013 and made it a virtual clone of Large Cap Stock, it got a Silver rating, too. Fidelity Growth & Income and its Advisor counterpart, however, get Bronzes since Fruhan hasn't run them very long and, unlike his other funds, they have to match the S&P 500 Index's yield.

Fidelity Blue Chip Growth (FBGRX) (Bronze)
As discussed in a previous Fund Spy, Sonu Kalra's consistent execution of his strategy earned this fund an upgrade to Bronze from Neutral in early 2013. True, it isn't exactly a blue-chip fund, with its preference for fast growers and a tendency to do worse than average in down markets. However, Kalra has made up for it on the upside. Investors comfortable with that trade-off should do OK. Unlike other funds, capacity isn't as much of a concern at this $16.5 billion fund.

Fidelity OTC (FOCPX) (Bronze)
This $11.6 billion fund is on the more aggressive end of the spectrum, with most of its holdings coming from the Nasdaq Composite Index and over-the-counter markets. Structurally, that's led to a much bigger slug of technology and small-cap stocks than large-growth peers, which has upped its volatility. Turnover also clocks in at more than 100%. Manager Gavin Baker has turned in strong results relative to the category since taking over for Kalra in 2009, though the fund hasn't stood out as much versus its Nasdaq benchmark.

Fidelity Capital Appreciation (FDCAX) (Bronze)
Fergus Shiel has run this $8.8 billion fund since 2005, taking a rather eclectic approach. He regularly delves into small- and mid-cap names, has occasionally held double-digit cash stakes, and doesn't worry about keeping sector weightings close to the S&P 500 benchmark's or large-growth peers'. He trades a lot, and the fund has been more volatile than its peers and benchmark, but he's posted strong results during his tenure.