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Fidelity® Growth Company Fund

  • Symbol: FDGRX
  • No Transaction Fee No Transaction Fee 1
  • Closed to new investors
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First Quarter 2014 Summary

Overview

  • Fidelity® Growth Company Fund invests across a spectrum of companies, from blue chip to aggressive growth.
  • Our investment approach is anchored by the philosophy that the market often underestimates the duration of a company's growth, particularly in cases where the resiliency and extensibility of the business model are underappreciated.
  • We focus on firms operating in well-positioned industries and niches that we find capable of delivering persistent sales and earnings growth.
  • This approach typically leads us to companies that we think have the potential to unlock shareholder value through either a growth-enhancing product cycle or an internal catalyst such as a turnaround or acquisition.
  • We believe it critical that companies fund their own growth - through the cash they generate - and benefit from management teams focused on creating long-term shareholder value.
  • For the three months ending March 31, 2014, Fidelity Growth Company Fund (Retail Class) gained 2.58%, outpacing the 1.07% result of its benchmark, the Russell 3000® Growth Index.
  • While this review mainly outlines drivers for the past quarter, our buy and sell decisions are typically based on stocks' longer-term prospects and not on short time periods.

Drivers of Fund Performance:

  • Our positioning in biotechnology stocks boosted relative performance the most. Notably, our long-standing position in biotech company Regeneron Pharmaceuticals helped. The stock returned 9% during the first quarter, lifted early on by the firm's announcement that fourth-quarter sales of Eylea®, its highly successful eye injection used to treat age-related macular degeneration, would surpass sequential and year-over-year growth. We trimmed the fund's position as the stock price climbed, but remained overweight due to our confidence in Regeneron's drug pipeline, which could yield more launches over the next few years.
  • Among individual stocks, an overweighting in Keurig Green Mountain (formerly Green Mountain Coffee Roasters) was the fund's top relative contributor. Shares soared to a 40% gain, jumping more than 20% in early February after the company announced an agreement with Coca-Cola to allow consumers to produce cold carbonated beverages at home. Later in the quarter, the company announced agreements with Starbucks and Peet's Coffee & Tea to offer both brands in its K-Cup® system.
  • No one industry or sector offered notable drag on relative performance. Looking across fund holdings, a heavier-than-index stake in weight-loss and nutritional supplements producer Herbalife ranked as the fund's largest individual detractor. The stock returned roughly -27% during the quarter after the company was faced with multiple setbacks. Shares plunged in January when a senator from Massachusetts filed letters asking the Securities and Exchange Commission and Federal Trade Commission (FTC) to examine whether Herbalife operates as a pyramid scheme. The stock took another hit in March when Herbalife announced it had received a civil investigative demand from the FTC.
  • Underweighting index heavyweight Microsoft detracted. Shares of the technology giant responded favorably to the company reporting quarterly results that exceeded consensus estimates on almost every metric, and were further supported by management's solid outlook. The stock was driven by an improved macroeconomic environment and a stabilizing market for personal computers. In addition, the February appointment of a new CEO was seen by investors as a positive. We continued to underweight the stock, as we view the growth prospects of other technology peers as more promising.

 End-of-Quarter Positioning:

  • The global economy continued its incremental expansion, with central banks around the world unwinding their easy-money policies. Growth stocks retreated in March due to concerns about heightened valuations in some areas, following strong returns for the last year.
  • Given this backdrop, we sought companies that we believed could grow revenues and earnings organically and were not as reliant on an economic recovery for growth. We also favored larger companies that we felt would be in a better position to succeed at this phase of the economic cycle. The average market capitalization of the fund's holdings moved up as a result. Additionally, we began looking for opportunities to add to those higher-quality growth names in the fund whose valuations had become more attractive as the quarter unfolded.
  • The fund's largest sector underweighting at period end was consumer discretionary, partly due to our preference for companies that specialize in newer forms of media -which are often categorized under information technology - versus older, more-traditional media companies such as newspapers or publishers that fall under consumer discretionary. Conversely, we overweighted technology, as we favored tech companies with what we consider high growth potential versus what we see available in capital goods and machinery stocks, which have similar economic sensitivity as many of the fund's tech holdings. Health care registered the largest sector overweighting at the end of the quarter, mostly due to our position in biotechnology, where we seek to diversify our holdings across an array of treatments and time-to-maturity.
Finally, we remain committed to a disciplined investment process in pursuit of strong long-term results for our shareholders.

Fund Manager(s)

More Information
Steven Wymer since 1/7/1997

Strategy & Objective

Objective

Seeks capital appreciation.

Strategy

Investing in companies FMR believes have above-average growth potential (stocks of these companies are often called "growth" stocks). Normally investing primarily in common stocks.

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