How Fidelity Growth Company’s Big Nvidia Bet Influences Its Rating

Key Morningstar Metrics for Fidelity Growth Company

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

Fidelity Growth Company’s FDGRX outstanding leadership continues to be a big advantage, but the fund is vulnerable if chip vendor Nvidia NVDA—a key position here—fails to meet the market’s high expectations.

Steve Wymer has run this fund for more than 25 years, earning a place not just as one of the industry’s longest-tenured large-growth managers but also as one of its most talented. Despite the fund’s huge asset base, Wymer has executed his process without missing a beat and consistently outpaced his competition in the large-growth Morningstar Category.

The fund has become increasingly defined by Nvidia, the leading provider of graphics processing units that has recently become one of the world’s most valuable companies. Since becoming the portfolio’s top holding in 2016, the stock has climbed more than 100-fold in market value, thanks in large part to its recently stellar results. Through its outperformance and despite Wymer paring it back, the stock’s share of the portfolio over the past two years doubled to around 16% of assets as of September 2024. That’s a huge position size in absolute terms and relative to the stock’s 11%-13% share of relevant large-growth indexes.

The stock is riskier than most. Although the company is in outstanding financial health, its valuation today hinges on the nascent and skyrocketing artificial intelligence GPU end market, where the emergence of alternatives or intensified competition are plausible concerns, according to Morningstar’s equity analyst team. Nvidia’s business has historically been prone to boom-and-bust cycles that have rocked its share price.

But this fund has never presented itself as tame. Wymer has long been willing to embrace profitless firms he thinks possess exceptional growth potential—notably in the biotech industry—which can subject it to steeper drops than the Russell 1000 Growth Index (the category benchmark) during market pullbacks. Although many of those budding hopefuls have petered out over the years, Wymer has shown a knack for spotting and successfully investing early in big winners.

The fund’s heft is a disadvantage in that it limits Wymer’s ability to nimbly trade or hold big positions in names he favors without exceeding ownership limits. Even so, the fund, which has long been closed to most new investors, remains exceptional.

Fidelity Growth Company: Performance Highlights

Since Wymer took charge in January 1997 through November 2024, the fund gained a bit more than 13.0% annualized, far outpacing the Russell 1000 Growth Index’s 10.4% and average large-growth peer.

Wymer’s penchant for fast-growers and his willingness to hang on to relatively pricey fare has upped the fund’s volatility, as measured by standard deviation, relative to peers and the benchmark. Still, the fund has typically posted benchmark-beating risk-adjusted results.

The fund’s relative performance has been remarkably consistent under Wymer. Since his start, its monthly rolling three-year returns have beaten the bogy 90% of the time and have ranked in the category’s top quartile nearly as often.

Typically sensitive to the market’s daily gains and losses, the fund tends to stumble more than most during drawdowns but to excel on the upside. That partly explains its success in 2023 and 2024 to date through November, when its 36% return comfortably outpaced the index’s 32%. But it was the stellar gain of Nvidia, the strategy’s largest holding, that accounted for a huge portion of its outperformance. A handful of other highflyers, such as Deckers Outdoor DECK and On Holding AG ONON, also helped.

On the other hand, the strategy’s above-index biotech stake has fared poorly over the past half-decade as the industry has posted meager returns—or losses in the case of smaller-cap biotechs like the ones this fund traffics in.