Fidelity Contrafund® Portfolio Manager Will Danoff Discusses His Outlook for the Markets

BOSTON--(BUSINESS WIRE)--Fidelity Investments^® has just released a new article with Will Danoff, portfolio manager of Fidelity Contrafund and Fidelity Advisor New Insights Fund, where he discusses his outlook for stocks, what ideas he is most excited about in 2013, and what investors should be thinking about. Below are some excerpts from the interview with Danoff.

When asked about his outlook for stocks, Danoff commented that: “I’m bullish. Stocks are relatively cheap, and U.S. companies have become much leaner. Management teams were worried about the environment, so they were conserving cash and allocating capital prudently. M&A activity was down about 20% in 2012. Boards were saying, ‘We’re not going for the long ball. We’re going to focus on maintaining lean inventories, low capital spending, and tight expenses.’ As a result, companies are nicely profitable and generating a lot of cash. So looking forward, I’m hopeful that we’re going to have modest top-line growth that will lead to decent earnings-per-share growth, good free-cash-flow yields, and total returns that may be a lot better than what we will see from cash and bonds.”

When asked about what ideas he is most excited about in 2013, Danoff stated: “I’ve been managing money for more than 20 years, and there have only been a few sectors or themes that have really made a big difference for me. Instead, the key to my strategy is identifying the best companies in each industry. Over the last couple of years, it’s been a tough market and a tough economy, but that shows you which management teams have actually been able to execute. That said, there are several emerging trends that could carry the economy and provide some stock picking opportunities. Housing bottomed last year, inventories have fallen, prices have risen, and unit sales have increased. The housing recovery could drive a lot of consumer confidence because two-thirds of Americans own a home. The housing sector could also improve employment, which should help the overall U.S. economy. The recent stabilization in U.S. manufacturing could have legs. Companies are saying that Chinese wage inflation is up, that they don’t trust the intellectual property protection there, that U.S. productivity continues to increase, and that U.S. energy prices are enticingly low. So more and more companies are moving plants back to the U.S. The industrials sector has been out of favor, and I have been finding more ideas there that should benefit from more competitive U.S. manufacturing and a recovery in housing activity.”

On what investors should be thinking, Danoff noted: “I think there’s a human tendency to overreact to the last bear market. Everybody is still caught in the 2008 crisis mode where they’ve raised cash and played defense with fixed income and bond funds. While the global economy is not great, I think we’re well beyond the crisis phase. My guess is a year from now the economy’s going to improve and stocks are going to be a good place to be. I’m bullish. So, I think if you’re in cash, you have to really think hard about it and say, “How much cash do I really need?”

For a copy of the full article from Will Danoff, please visit https://www.fidelity.com/viewpoints/investing-ideas/time-for-stocks.

Before investing, consider the funds’ investment objectives, risks, charges and expenses. Contact Fidelity or visit fidelity.com or advisor.fidelity.com for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Investments in mid-sized companies may involve greater risks than those in larger, better-known companies, but may be less volatile than investments in smaller companies.

Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest-rate, currency-exchange-rate, economic, and political risks, all of which are magnified in emerging markets. These risks are particularly significant for funds that focus on a single country or region.

Sector investing can be more volatile because of the narrow concentration in a specific industry.

The information presented above reflects the opinions of the speaker as of January 15, 2013. These opinions do not necessarily represent the views of Fidelity or any other person in the Fidelity organization and are subject to change at any time based on market or other conditions. Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.,
500 Salem Street, Smithfield, RI 02917