Contrafund adds to Google stake in third quarter amid lift from Facebook

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By Tim McLaughlin

BOSTON (Reuters) – Fidelity Investments’ $101 billion Contrafund added to its industry-leading stake in Google Inc in the third quarter, and got a payoff on Friday as the Internet company’s stock soared past $1,000 a share to an all-time high.

Contrafund, managed by closely followed stock picker Will Danoff, returned 8.94 percent in the third quarter, easily beating the 5.24 percent gain for the S&P 500 index. But Danoff didn’t get any help from Google in those three months as the shares were flat and lagged the overall market. Google was the biggest factor in holding back the fund’s relative performance in the quarter.

But in his latest commentary letter released this week, Danoff said Google’s near-flat return opened up an opportunity to add to a stake that was worth $5.8 billion at the end of August. He did not provide specific figures.

At the end of August, Google made up 6 percent of the fund’s net assets. Among mutual funds, Contrafund is the biggest Google shareholder.

“Despite the underperformance, our long-term view on the stock remained unchanged,” Danoff said in Contrafund’s commentary letter for investors. “Because we believe the firm possessed superior operating advantages stemming from its dominant market share in Internet search and highly innovative culture, we increased our position in the stock on its weakness.”

On Friday, Danoff’s bolstered bet on Google looked like the right move as the stock jumped 12.5 percent to $1,000.07 in late-morning trading on Nasdaq.

On Thursday Google reported a big upswing in mobile and video advertising that helped drive a 23 percent gain in quarterly revenue.

More than a dozen brokerages raised their price targets on the stock to between $880 and $1,220, with Deutsche Bank raising its price target by 26 percent.

Since January 2, Google shares are up 42 percent, rewarding Danoff and other investors.

But in the third quarter, Danoff’s best bets were on Facebook Inc and Tesla Motors Inc. Facebook’s stock doubled, and got a boost from gains in mobile advertising.

Danoff said Tesla was re-engineering the automobile for the first time in decades. The shares rose more than 80 percent.

(Reporting by Tim McLaughlin; Editing by Gerald E. McCormick and Jeffrey Benkoe)

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