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JASON GROW/The Globe and Mail

It isn’t easy to be nimble when you’re running one of the world’s largest mutual funds. Yet Will Danoff, who manages the sprawling US$116-billion Fidelity Contrafund (for American investors) has beaten the index handily since taking over as manager in 1990. In Canada, his Fidelity Insights Class fund of mostly U.S. stocks has also outperformed over its nearly three-year life. We asked the 59-year-old manager why he’s still a fan of Facebook Inc., despite controversy over data-privacy breaches, and what draws him to gold stocks and other astute plays.

What’s your strategy for beating the market over time?

I run Contrafund with a growth bias. I invest in companies that are going to have better earnings per share in three to five years, and I like to cast a wide net. I also look for turnarounds where there is a catalyst, such as new management, that can accelerate earnings. My Canadian fund is run similarly, but some of the same names, such as software companies Okta and MongoDB, are bigger bets.

Unicorn IPOs have had a rough reception this year. What drew you to Pinterest when it was private?

I first invested in Pinterest in 2013, at around a US$3-billion valuation. Users pin pictures of things they find attractive, such as fashion or housewares. Monthly active users were growing rapidly, and I felt the CEO was building an enduring brand. There was commercial intent [from ads] that caught my eye. However, Facebook’s Instagram is now a competitive threat. Pinterest’s valuation has grown fivefold, so we are looking good. But it is still not profitable, although it is growing.

Where do you see opportunities now?

I like technology companies that are global, are highly profitable and generate a lot of free cash flow. Microsoft, Facebook, Amazon and Salesforce are big commitments. Health care, particularly medical devices, is another opportunity. The Chinese want world-class health care, so they are paying for analytical instruments from companies like Danaher, and other devices from Abbott Laboratories and Baxter International.

Facebook is a big holding. What’s the attraction?

I don’t know if I would be as bullish if it didn’t have Instagram, which is a white-hot asset. Between Facebook, Instagram, WhatsApp and Messenger, the company has something like 2.7 billion monthly active users. I understand that politicians want to break up Facebook, but if it’s so bad, why do so many people go into its properties? It is approaching over US$70 billion in annual [advertising] revenue in 2019 and is still growing at 30% a year. That’s impressive.

Why do you own gold stocks?

Investing in gold pays off once in a while. Gold is a tough industry, so I want to own the best of breed. I like companies with really good management teams that can grow earnings regardless of the commodity price. I met Pierre Lassonde and Seymour Schulich, who co-founded Franco-Nevada, in the early 1990s. They are two of the best gold executives I have ever met. The company does a good job negotiating lucrative royalty deals. I own the stock, as well as Kirkland Lake Gold, B2Gold and Barrick Gold.

What have been your best and worst investments?

Apple has been a big contributor to Contrafund. Its turnaround was phenomenally powerful after founder Steve Jobs returned in 1997. The iPhone turned out to be a revolutionary product. Apple became a big position, and I rode it for most of the ride. I did cut back [on the shares] after he died, but that was a mistake. His successor, Tim Cook, has done a phenomenal job. When I was an analyst in the 1980s, one of my biggest mistakes was to recommend Campeau Corp. It used leveraged buyouts to acquire department stores, but it went bankrupt. When business is good, leverage accelerates your earnings. When business is bad, it crushes earnings.

Do you have a mentor?

I was an analyst on the Fidelity Magellan Fund when it was run by Peter Lynch. He is a great investor and wrote One Up on Wall Street. When my fund got beaten up recently, I reached out to him. He always says, “Stay on the offensive. Your best ideas are in the fund. It’s just a matter of doubling down on the good stories.”