Fidelity Growth Company’s long-standing success is closely tied to the visionary leadership of Steve Wymer and its strategic investments, most notably in Nvidia. Since Wymer took charge in 1997, the fund has demonstrated remarkable performance, consistently outpacing peers in the Morningstar large-growth category. However, its growing reliance on Nvidia introduces unique risks alongside its rewards.
The fund’s strong credentials are evident in its Morningstar Medalist Rating of Silver and its “Above Average” or “High” ratings across process, people, and parent pillars. Over 25 years of stewardship, Wymer has consistently identified high-potential investments, contributing to an impressive 13.0% annualized return as of November 2024, significantly above the Russell 1000 Growth Index’s 10.4% return.
Nvidia has been a cornerstone of the portfolio since becoming its largest holding in 2016. The stock’s market value has soared more than 100-fold, driven by the company’s dominance in the graphics processing unit (GPU) sector and its role in artificial intelligence innovation. By September 2024, Nvidia constituted a substantial 16% of the fund’s assets, outpacing its 11%-13% weighting in comparable large-growth benchmarks.
Despite Nvidia’s success, its significant portfolio share comes with volatility. The stock’s valuation heavily depends on the rapidly growing AI GPU market, where competitive threats and technological alternatives could disrupt its trajectory. Additionally, Nvidia’s history of boom-and-bust cycles highlights its susceptibility to market shifts, adding layers of risk to the fund’s returns.
Wymer’s investment philosophy embraces such risks, extending to speculative but high-growth industries like biotech. This approach has delivered standout winners over the years but has also subjected the fund to pronounced drawdowns during market corrections. For example, the fund’s above-index exposure to smaller-cap biotechs has struggled in the past five years, reflecting the broader industry’s underperformance.
Nonetheless, Fidelity Growth Company’s strategy has repeatedly proven its mettle in both bullish and volatile markets. The fund thrives during market upswings, as seen in its 36% return in 2023 and year-to-date through November 2024, comfortably surpassing the benchmark’s 32%. Much of this outperformance is attributed to Nvidia, but other contributors like Deckers Outdoor and On Holding AG have also played a significant role.
Despite its impressive record, the fund’s large asset base poses challenges. Wymer’s ability to nimbly trade or expand holdings is limited, and the fund remains closed to most new investors to preserve its strategic flexibility.
Fidelity Growth Company exemplifies high-risk, high-reward investing. Its reliance on Nvidia underscores both its strengths and vulnerabilities, highlighting the critical role of Wymer’s experienced leadership in navigating the fund through market complexities. While past performance has been exceptional, the fund’s future hinges on maintaining its competitive edge amid evolving market dynamics.
