Actively managed funds have not, on average, had the best of performance in recent years, especially compared to their passively managed counterparts. But that doesn’t mean they have all been a disappointment. The Fidelity Advisor Growth Opportunities Fund, managed by Kyle Weaver, has been the best performing mutual fund over the past 12 months with an annual return of nearly 27%. It has averaged similar returns over the past three years and over the past ten years has averaged 22% annually.
While the fund contains some big names like Tesla Inc. (TSLA) and T-Mobile US Inc. (TMUS), as well as four out of five FAANG members—Facebook Inc. (FB), Amazon.com Inc. (AMZN), Apple Inc. (AAPL) and Google parent Alphabet Inc. (GOOG)—it’s number one holding is not even a publicly traded stock: Juul Labs Inc., the e-cigarette manufacture based in San Francisco, California, holds the top position comprising 5.3% of the Fidelity fund’s holdings, according to its latest filing as reported by Business Insider.
10 Big Bets by a Leading Fund
Source: Business Insider
What It Means for Investors
The e-cigarette startup founded in 2007 was valued at $38 billion last December when tobacco giant Altria bought a 35% stake. Altria, the maker of Marlboro cigarettes, said earlier in the year that Juul Labs increased revenue from just $200 million in 2017 to $1 billion in 2018. “Sales of the company’s e-cigarette devices and pods increased significantly the past 12 months, leading to a higher valuation,” Weaver told Business Insider.
Among the Fidelity fund’s other holdings, Tesla stands out for being one of the more risky bets. For years the automaker, valued at a $47.4 billion market capitalization, has been burning through cash at a rapid rate as investors wondered anxiously if the company would ever be able to turn consistent profits. The fourth quarter of 2018 marked the first time Tesla has reported two consecutive quarters of positive earnings. But first quarter earnings are expected to be negative once again and the company’s stock is currently down more than 14% over the past year. Perhaps, Weaver sees something other investors don’t.
T-Mobile, on the other hand, is up more than 17% over the past year and recorded record-beating revenues in the latest fourth quarter. The mobile communications service provider, valued at a market cap of $61.6 billion, beat earnings estimates and provided bullish guidance for 2019. The company still has a lot of growth potential as it tries to build a leading 5G cell network.
While the Fidelity Advisor Growth Opportunities Fund has been able to best its peers over the past year and stay ahead of its benchmark over the past decade, as a large growth fund it has benefited from the long bull market following the financial crisis. The real test going forward will be how it performs in an extended downturn.