The veteran Fidelity Contrafund stock-picker on why earnings drive returns, how he evaluates management teams, and what separates lasting winners from early rocket ships.
We’re taping this podcast live at the Morningstar Investment Conference, where we’re delighted to be joined by Fidelity’s Will Danoff. Will runs a number of Fidelity equity strategies, the best known of which is Fidelity Contrafund FCNTX, a mutual fund he’s been managing since September 1990. Morningstar named Will its Domestic-Stock Manager of the Year in 2007. Prior to becoming a portfolio manager, Will served as a retail analyst at Fidelity and assistant portfolio manager at Fidelity Magellan FMAGX. He graduated from Harvard University and earned his MBA at the Wharton School of the University of Pennsylvania. Will, welcome back to The Long View.
00:00:00 Introduction
00:00:56 Investing Origins and Early Influences
00:00:53 Retail Analysis and Unit Economics
00:10:29 Reg FD Changes and Adapting Research Processes
00:15:00 Identifying Durable Competitive Advantages
00:19:24 SpaceX and Buying Private Companies
00:22:40 Investing Mistakes and Avoiding Unprofitable Companies
2026 Morningstar Investment Conference: From SpaceX to Safeguarding Retirement
Here’s Fidelity Contrafund’s Will Danoff’s Secret Sauce
As Legendary Manager Will Danoff Leaves Fidelity, Should Investors Follow Him Out the Door?
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(Please stay tuned for important disclosure information at the conclusion of this episode.)
Amy Arnott: Hi, and welcome to The Long View. I’m Amy Arnott, portfolio strategist for Morningstar. We’re taping this podcast live at the Morningstar Investment Conference, where we’re delighted to be joined by Fidelity’s Will Danoff. Will runs a number of Fidelity equity strategies, the best known of which is Fidelity Contrafund, a mutual fund he’s been managing since September 1990. Morningstar named Will its Domestic-Stock Manager of the Year in 2007. Prior to becoming a portfolio manager, Will served as a retail analyst at Fidelity and assistant portfolio manager at Fidelity Magellan. He graduated from Harvard University and earned his MBA at the Wharton School of the University of Pennsylvania. Will, welcome back to The Long View.
Will Danoff: Great to be here, Amy. Really, a real pleasure.
Arnott: Well, thank you for joining us. We wanted to start by talking a bit about your origins and career path. If we kind of rewind all the way back 40 years ago, can you tell us a bit about how you first got interested in investing and who some of your early mentors and experiences were?
Danoff: Yeah, I mean, I feel so lucky that I did end up at Fidelity. I mean, whatever, it’s been 40 years, it’s been a remarkable run. We’ve got a great team. You mentioned the Magellan fund, Peter Lynch, just an exceptional individual, but I guess I was always interested in games. I liked to play games. I used to play poker with my friends and played chess and backgammon. So I don’t know, the stock market in a way is a big game. So I was interested. And then, a family friend had done well. And again, my father’s a doctor, my mother’s a kindergarten teacher, so I didn’t really have much experience in business or in the market. But this one friend retired when, I don’t know, I think he was in his 40s. And I don’t know, somehow it was intriguing to me. So I ended up not liking doctoring as much as I thought—I volunteered at a hospital, and I just didn’t feel the calling. So ended up becoming a stock-picker.
And I will say I worked on Wall Street for a couple years before business school, Amy, and the people there were just having fun. It was very dynamic. These were men and women in their 40s, and they were just high-fiving, and it was in the early ’80s, the market was going up, and I think I just liked the dynamic aspect of the market. And so luckily, Fidelity hired me, and they really trained me, gave me an opportunity to learn about the retail industry, which was really helpful. But before I forget, we have to look back and see if, since 2007 when you gave me that great award, if the fund has done well. I think it has. Maybe Robbie will do the research before the keynote today, but it’s a great team, and I’m just grateful to Fidelity.
I’m also grateful to so many of the shareholders and Morningstar for believing in me and being patient. As you know, the markets go up and down, and it’s a streaky business, but the shareholders have been, for the most part, patient. And then when you look back, it’s this notion of utter respect for the companies and the management teams who have worked so hard to build new businesses or work hard to make an existing business that much better. And there’s just so much that goes into delighting customers, delighting employees, and out of that comes the delight for the shareholders.
But I got dinged at Fidelity in the summer internship coming out of Wharton. So I was immature, and I can see in hindsight why I didn’t make the cut, but for all your listeners, don’t give up. And one of the fellows who was graduating one year ahead of me at Wharton, I had discovered at a party that he worked at Fidelity, and I was just like, I have to meet this gentleman, Steve Kaye, who runs the … he did the healthcare stocks and then ended up, I think, running Growth & Income. Did a great job, great investor, he’s still at Fidelity. And this was before email and everything. So I literally wrote him a handwritten note, and we all had little folders, and I said, “I need to meet you.”
Arnott: Interoffice mail?
Danoff: Yeah, right, exactly. “I have to meet you. I want to talk to you about Fidelity.” And he just said it was a great place. He had a great summer internship, and that I should apply again. So with his encouragement and with his advice, I applied and was able to get the job full-time, and we’ve been colleagues together, and you think about, just like Morningstar, so many people have been there for a long time. You made a career there, and I think you can be more honest with people that you know and you’ve worked with, and sometimes you have to deliver messages that people don’t want to hear, but there’s respect, and you can also move faster when you’ve known somebody for a long time, and we need to sit down and talk about this.
And I think being a retail analyst, it’s sort of like healthcare or tech. It’s a very large group, and there were all sorts of companies. In the mid ’80s, it was the time of the superstores, the Toys “R” US, the Home Depots, and you saw growth stocks, then there were turnarounds. The great Chicago company—Sears Roebuck—was trying to turn around. It was a perpetual turnaround. Kmart was trying to turn around. You had lots of different types of companies, and I think that makes you a better investor, and that really helped me.
I mean, honestly, Amy, I was a mediocre analyst for the first 18 months, but retailers liked to talk to Fidelity. I remember many of the companies had stores in the Boston area, and I would really just say, “Listen, when you’re visiting your stores in Boston, come and see Peter Lynch.” That was my pitch. That’s why I was a good analyst. And so they would come, and Peter would say, “That was remarkable. I’m so happy to have met this particular executive or that executive.”
And I learned how to ask questions, what to think about. And the other point about retail that was so great was this idea of unit economics, opening a new store, how much does it cost? What is the expected early sales? When do you reach …
Arnott: Is your same store sales number …
Danoff: Yeah, assuming same-store sales are pretty good early on, when do you reach breakeven? What is the “four-wall margin”? So you can say, “Oh, I put in a million and by year three I’m making 400,000. That’s a good return.” Anyway, so it was a good group to stretch yourself as an investor. And then of course you have to … And there are all sorts of auto parts retailing. There were computer supply retailers, office supplies. So, of course, I got to know Liz Clayborn and other apparel companies because a lot of it is apparel. So you learn, and you just rinse and repeat, Amy. I’m the Woody Allen of Fidelity. I just keep showing up. As I said, the reason I’m late, and I apologize for being late, is we squeezed in a meeting with CDW, which is a mid-cap that I knew before they went private, and they’ve gone public again. So I’ve had a long history with CDW. And then Terry Duffy, the great CEO of CME, agreed to see us. So I had two good meetings today in Chicago. You got to keep learning, you got to keep showing up.
But that notion of unit economics, I think back to … I forget when Starbucks went public. I think it was ’92, so maybe before we met, but it was so obvious that selling coffee at a premium, here’s my Starbucks, still whatever this is, 40 years later, I forget the numbers, but he was leasing his units, and he was just so profitable, that I think it was like a 60% ROI. And so you just knew he could sell fund. And at the time, I think he had 140 units, he might have 14,000 now in the United States, and he even said, “I was inspired by Italy.”
This was Howard Schultz. But honestly, if you look back in the annals of Fidelity, in many cases, we had the stock on hold. It was too expensive. It’s like, how could it be too expensive? Well, people were expecting continued comp sales growth, and optically it looked expensive, but it was fairly valued for a really unbelievable company. I mean, his same-store sales were double-digit since forever. He was very successful in the Pacific Northwest, and he was just opening in San Francisco. And it was going well there. And then he went to New York, and everyone said, “Oh, labor’s too expensive. The New Yorkers are going to crush you.” They ate him up. They loved him. So anyway, but a high ROI, you think about what we’re doing, we’re giving money to these companies going public. What are you going to do with the money? I’m going to do a bad acquisition. No, I’m going to open stores or open restaurants that are going to generate really good returns.
Benz: I wanted to ask about meeting with management. I know it’s always been a big part of your process. You’re just doing it today. We talked to Charlie Ellis within the past year, and he referenced Regulation FD as a game changer for active management, just saying that everything changed when fund managers didn’t have that access that they once did. Can you reflect on that? Was that a pivotal event for you and your process?
Danoff: That’s a very good question. And Reg FD has changed the communications for companies. I feel, Christine, that the information we want is just to understand the business. We’re not interested in anything that’s certainly material nonpublic, but even we just want to know what the company is sharing and how they view their own business. So it’s changed a little bit. It’s probably changed some of these short-term investors, but Fidelity, we’re interested in long-term investing. Peter used to always say the big money is really made in year four and five. So get to know management, understand the ROI of their business and why they are so profitable, why they’re generating a lot of shareholder love, and what the value proposition really is. Most stories come down to three or four bullet points. It’s not anything that management can’t talk about because of Reg FD.
I mean, when I first met Warren Buffett, he said, “If I were you, I wouldn’t talk to any CEOs.” I was like, “That’s what I do.” And he had a good point. He said, “Everything’s in the Ks and the Qs.” And it is funny when, after I go to a meeting, I’m saying, “I got to dig in a little bit here.” And I look at the last presentation or the 10-K, and it is all there.
But he also made the good point, which is, and this is probably a pre-Reg FD, but it’s still applicable to all investors: Any good CEO is going to tell you exactly what they think you want to hear. And so you have to be very careful. Management’s coming around, are they trying to goose their stocks so they can do an acquisition? Are they goosing their stocks so they can sell some stocks? And so what you want to do is take what the market gives you, and Reg FD probably has given us less information, but it’s still out there. And in many ways it arguably could play to Fidelity’s strength and the other big firm’s strengths because we do have industry expertise, and we can hopefully use our mosaic of going to industry conferences, going and talking to customers, talking to distributors, talking to other industry players and government officials and this sort of thing and piece it together.
But I’d say to Charlie, I don’t know Charlie, but I’d tell him he should work harder. Hard work can solve a lot of problems, but I don’t want to have any information I shouldn’t have. That can restrict us. But management, you’ve got to, as I said earlier, I mean, it’s remarkable what they do. And so I think one of my value adds is to look back, like Terry Duffy’s been running CME for 20 years. I mean, it’s just remarkable what he’s done, and he actually has been an outstanding capital allocator. He bought Nymex, and he bought in, I think, the CBTs. Anyway, and you can just—Jensen Huang. I mean, when Jensen reached a trillion market cap, we happened to be doing a tech trip, and we were out there, and I had the insight, we can’t just show up and say, “Thanks, Jensen, you built a trillion-dollar company.” So I had one of the junior analysts use the early AI applications to make some AI art for him, and it was like Jensen is like an astronaut, and Colette, who’s the CFO, was the copilot, and it was the Rocket Ship Nvidia, but 24% compounded growth for 25 years, you just don’t see that.
That’s upper echelon. I mean, it’s remarkable.
Arnott: When you’re looking for that type of best-of-breed company like an Nvidia or Starbucks, how do you separate out something that looks like it’s growing quickly, it looks good on paper, but may not have an enduring advantage?
Danoff: Amy, it’s a very good question, and it’s a good point. What is the value proposition? It’s like, do customers want what you’re making? And then the key second question is, can others do what you’re doing? And that is hard. And honestly, Amy, listen, I got my notes. Jensen, I first met you in 2002, you were talking about the GeForce 256, and he was like, “Oh, that was the first GPU.” I had no clue how important GPUs could be. And a matter of fact, for the first 15 years, it was very competitive between Nvidia and then the other company, I think, it was the ATI or something. But originally it was graphics accelerators, and then he had the great insight. He was talking to his customers. Often, the great entrepreneurs are close to their customers. He realized that people were buying GPUs to do things like, in hospitals, analyze X-rays, and also then he saw the AI boom. He delivered that first GPU to Elon and the folks at OpenAI, which is remarkable.
But I would say, for me, it’s what have you done in the last five years? And if you’ve grown profitably and gained market share, you’re probably doing something better than everybody else. If you’re growing really fast, you’re onto something new, and that can be very powerful, but often it’s better to wait, and you find out who’s really good after the competition hits you.
I mean, I was an investor in Chicago-based company Groupon, and I was like, wow, this is exciting because we did some Google search, and it was like, they were the fastest company to a billion in revenue. And I was like, I have to own this thing. This is taking off. And then at least Amazon and maybe somebody else copied them, and it didn’t scale, and it ended up being a rocket ship that blew up pretty badly, unfortunately.
So I don’t know if there’s any secret sauce. It’s a bit of a slugging average where you have to hope that the company keeps executing. One of the strengths of Fidelity is, despite Reg FD, is just monitoring what’s going on. I take my notes, and in the case of Terry, I was like, “Terry, I haven’t seen you since 2024. This is what you said two years ago. What’s happened? Have you executed?” And there’s always stuff that happens to management teams, and it’s fine if, “Yeah, we were wrong.” “Well, what did you learn?” “It didn’t work in India.” “Well, what did you learn?” “It didn’t work in California,” or something. “What did you learn?” So for me, it’s like, what happened in the last five years? Do I like this earnings trajectory or the sales trajectory? And then, without getting into Reg FD, what is the opportunity looking out the next five to 10 years?
And hopefully you have confidence that management will be able to execute. But I’ve been shaken out of a lot of good stories, Amy. And the beauty of the business is—I tell the team and I tell all your investors and tell you guys—if a stock has doubled, you haven’t missed it. And lately I’ve been saying if a stock is quadrupled, you haven’t missed it, because a lot of stocks are up now. And it is a little hard.
Munger, of course, advised Warren Buffett, better to buy a great business at a fair price than a fair business at a great price. But some of the P/Es get up there, and you’re like, you’ve got to believe further out, and you’ve got to believe that you really understand the business. But yeah, I would say we’re continuing to learn, and sadly, Amy, I always joke it’s mistakes are part of the game, just try not to make the same mistakes. And somehow I keep making the same mistakes, but we’re trying.
Benz: You mentioned rocket ships a couple times, and we noticed that SpaceX was among your top 10 holdings as of the end of April. Can you reflect on buying companies before they go public, buying stakes in companies before they go public? How do you decide when to do that versus waiting until a company’s public?
Danoff: Yeah, Christine, I can’t comment on specifics …
Benz: I get that.
Danoff: … but at some point, my colleagues and I said, “Hey, we’re pretty good at analyzing public companies. We have all this industry expertise. Might there be some private companies that we could help?” And I’d say it’s cyclical, and as you know, many of the private companies have stayed private longer, partly because they have access to capital as private companies, but many of them are doing extremely innovative things, and Fidelity is always interested in finding new innovative companies. The entrepreneurs are remarkable, and the scale of a firm like Fidelity enables us to do that. Often, the public companies are a little less mature, and we have to be careful about that. Entrepreneurs are very talented, but they can be needy, but I’ve been very impressed, and often, it’s just once in a while, there is someone really exceptional.
Contrafund is an investor in Zipline, which is run by a fellow named Keller Cliffton, who’s just remarkable, and he’s one of the leaders in drones. And again, it’s just one of these crazy stories. It’s like, what happened? They tried to make a drone, and they were out in Nevada, I think, and they were struggling a bit. And then, I’m not sure exactly how, but he convinced the health minister of Rwanda that he could deliver blood to rural hospitals. There was a very high incidence rate of young mothers dying after they delivered their babies because there was no roads out in these hospitals. That’s remarkable. And so again, they figured out the technology in Rwanda of all places, and now they’re working with Walmart and others in the United States, but it was just sort of like, this is unbelievable, and he’s a great entrepreneur. And so I decided to do it. I mean, sometimes you make a mistake, and you make a judgment call, and as you all know, there are people who can do a good job of convincing you.
So that was just one, but there are others, and the key then is to monitor what’s going on. And in the case of SpaceX, when we first got involved, I think it was in 2012, the one advantage we have, Amy, with the privates, is you can’t sell. I believe in long-term investing, but there’s so many opportunities to panic out. So with the privates, you can’t really panic out because there’s not that much of a market.
Arnott: You talked about mistakes and how they’re sort of inevitable. And I know you have referenced Tesla, the fact that you sold part of your position back in 2017 and 2018, I think.
Danoff: I think for me, the biggest mistake with Tesla was when they opened the factory in Shanghai successfully earlier than schedule, under budget, I think, but they were able to sell the cars at Western prices when they had a Chinese cost of goods sold. So they were very high margin. I forget, the third quarter, the fourth quarter of 2019, maybe, they had a blowout quarter, and you’re talking about if a stock has doubled, we haven’t missed it. They report a good quarter, stock goes up a lot, and I was like, “I can’t buy this up 20%. I’m going to wait.” But that was the moment when earnings estimates started going up. I mean, the one lesson we haven’t really talked about and why I think Contrafund and Fidelity have done so well, it’s this notion of stocks follow earnings. The earnings per share and the stock price are very highly correlated.
So in that case, and in every quarter, Reg FD or not, you get a report card. Company growing earnings 20, growing earnings 10, growing earnings 40. You can decide which ones you want to play in, but I hesitated, and I was just like, “This was a blowout quarter, but I can’t pay out aftermarket or the next day.” But it was the beginning of a six- or eight-quarter explosion in earnings, and I kind of missed it, and a lot of growth managers either jumped on or were already involved, but that was a big mistake. So that was a miss, and I knew the company, and I shouldn’t have missed that one. I don’t know, just other mistakes in general. I mean, going for the long ball, the corollary to stocks follow earnings, I used to work next to a great investor named Jean Park, and Jean used to say, I think she was a Morningstar Manager of the Year one year, or maybe she wasn’t, but “avoid unprofitable companies.”
So if I have any advice to the Morningstar community, it’s: Be very careful of unprofitable companies. Maybe you miss a double or a triple or quadruple, but if you wait until they’re profitable, that’s a lot safer.
But it’s hard because Steve Wymer, who’s done a great job for us in Growth—the Growth Fund, unbelievable record, unbelievable investor—has done a lot in biotech, and biotech companies are unprofitable until their drug is approved, and then they’re very profitable.
Arnott: Yeah. Burning through cash.
Danoff: Yeah. There’s really no easy rules to success, but stocks follow earnings is a good one. And in general, you’re wise, especially if you’re not a professional, to avoid unprofitable companies, and the corollary is, oh my God, the exciting new blowout long shot. The Hail Mary passes are often difficult for the shareholders.
Benz: Well, Will, it feels funny to have you reflecting on your mistakes here at the end of what has been or toward the end of what has been an amazing career. It’s a real honor to have spoken with you today. Thank you so much for taking the time.
Danoff: We’re out of time? God, I’m just getting started. It’s been so much fun, and I want to say that, Amy Arnott, you found us very early on, so listen to Morningstar, and buy more Fidelity. Fidelity is a great place. We are going to continue to execute for our shareholders.
Arnott: Well, congratulations on your retirement. I know you’ll be around for another six months or so, but we’re really glad that we …
Danoff: I don’t think I’m going to go very far. I love Fidelity. They’re part of the family.
Arnott: You might show up and roam around.
Danoff: And Morningstar is part of my family.
Arnott: Yeah.
Danoff: So thank you.
Arnott: Yeah.
Danoff: It’s been great.
Benz: Thank you so much, Will.
Danoff: Awesome.
Arnott: Thanks for joining us today.
Danoff: Been a pleasure.
Arnott: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts. You can follow me on social media at Amy Arnott on LinkedIn.
Benz: And at Christine Benz on LinkedIn or @christine_benz on X.
Arnott: George Castady is our engineer for the podcast. Jessica Bebel produces the show notes each week, and Jennifer Gierat copyedits our transcripts. Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at thelongview@morningstar.com. Until next time, thanks for joining us.
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