A Contra Fund is a type of mutual fund that invests against the existing market trends and purchases stocks that are not performing well currently. The fund manager takes a contrarian view of the stock when it is shunned by the investors and also when there is a superlative demand for the same. The fund purchases stocks at a value lower than its expected value in the long-term. There can be times when certain sectors witness a slump due to the prevalent market conditions. A contra fund invests in stocks of companies from these sectors and holds on to them till the demand increases. Contra funds tend to perform better over the long-term and are not ideal for short-term investments.
Fidelity Contrafund (FCNTX) is an example of a Contra Fund. It is a mutual fund operated and provided by Fidelity Investments, and its current manager is William Danoff, who has headed the fund since 1990. The fund focuses on U.S. large-cap stocks with market values greater than $10 billion, and more than 45% of the funds holdings are in the information technology and communications services sectors. As of March 31, 2022, Fidelitys Contrafund has posted a three-year return of 19.04% and a five-year return of 17.83% .
