Will Danoff is a name that resonates with all investors, mostly long-term investors. He has been managing Fidelity’s Contrafund since 1990. Danoff has guided one of the world’s largest actively managed funds, with growing assets under management (AUM) to over $300 billion.
But what makes Danoff such a visionary investor? Let;’s find out.
Who is Will Danoff?
Will Danoff has been Fidelity Contrafund’s portfolio manager for over three decades. Known for his long-term investment style, Danoff focuses on finding companies with high growth potential and quality fundamentals. He believes in combining thorough research with a focus on long-term growth. He truly creates a blueprint for investors.
He recently gave an interview to Conch Shell Capital and shared his investing knowledge. Let’s understand his investing lessons and why they matter:
Investing Lessons from Will Danoff
Below are eight of Will Danoff’s most important investing lessons:
1. Quality Over Price
“My grandfather was in the sweater business, and they used to say the price is forgotten, but the quality remains.”
Will Danoff believes in investing in high-quality companies, even if it means paying a premium. Much like a well-made sweater that lasts for years, quality investments often offer longevity and resilience. He suggests that buying a high-calibre stock can be a smart move, as such companies are likely to grow over time. The lesson here is to choose on quality over cheap prices, as the long holding period and performance of solid companies can ultimately pay off.
2. Stock Prices Follow Earnings
“Stock prices follow earnings per share. If a company doubles its earnings in the next four or five years, the stock price is likely to double too.”
Danoff tells us about the importance of earnings growth, noting that stock prices are often a reflection of a company’s ability to generate profits. For investors, this means that finding companies with strong and consistent earnings growth can be a major strategy for improving returns. By estimating earnings growth, you can foresee stock price appreciation.
3. Know Your Reasons Before Buying
“I like to write down why I’m buying this stock… it helps prevent thesis creep.”
Danoff keeps his investing disciplined by writing down his rationale for each purchase. This habit of documenting helps keep emotions in check, ensuring he sticks to the original investment thesis. It’s a strategy that helps prevent “thesis creep,” where investors might shift their reasoning for holding a stock over time, potentially losing sight of why they bought it in the first place.
4. Listening as a Competitive Advantage
“My competitive advantage is to listen.”
Danoff’s edge comes from paying close attention during company meetings. He devotes himself to details that other analysts might miss. In a time where everyone is glued to screens, he advises that sometimes listening carefully can tell what you wouldn’t find in data.
5. Know When to Sell
“Sell a stock when the fundamentals deteriorate. But a better reason to sell is when you have a better idea.”
He explains that selling isn’t just about cutting losses; it’s also about reallocating capital at better places. If a company’s fundamentals fall, it might be time to sell, but an even stronger reason to sell is when a superior investment idea presents itself. This method helps maintain a portfolio full of promising opportunities rather than lagging stocks.
6. Strong Offence is Good Defense
“A good offence in our business is a very good defense.”
His theory for a proactive approach is to continue seeking high-growth companies. This philosophy serves as a form of defense, as these companies often outperform market downturns better than others. For new investors, the major thing to remember is that building a strong portfolio with companies of higher growth scope can be a way to protect your investments over the long term.
7. Mistakes are a Part of Investing
“Mistakes are part of life. Mistakes are a huge part of investing.”
He views mistakes as inevitable and sees them as learning opportunities. Every investor, regardless of experience, will make errors; the key is to learn from them. This attitude can improve your future investment decisions and remind you not to fear setbacks.
8. Hard Work Outperform Opportunities
“The harder you work, the more opportunities you find.”
Lastly, Danoff suggests that due diligence in research helps you uncover opportunities that others might miss. His point here is clear: Thorough analysis and hard work can give you an edge. If you’re willing to put in the effort, you can spot growth companies early and gain an advantage over those who rely solely on surface-level information.
Wrapping Up
Will Danoff’s investing approach is both visionary and practical, especially for those looking to build wealth over the long-term. Using these lessons in your portfolio, you can not only improve your portfolio’s quality but also gain confidence while making investment decisions.
His lessons remind us that successful investing is not just about finding the right stocks but about being patient and learning from your mistakes.
FAQs
Who is Will Danoff?
Will Danoff is Fidelity’s portfolio manager for Contrafund segment. He is known for his unique investment strategies and focus on long-term growth-oriented companies.
Why does Danoff choose quality over price?
Danoff believes quality investments can outperform long-term value that last longer despite their higher cost.
What is thesis creep?
Thesis creep occurs when investors change their original reasons for holding a stock, which sometimes results in misdirection in your portfolio.
When does Danoff recommend selling a stock?
He says that you must sell when a company’s fundamentals deteriorate or when you find a better investment opportunity.
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