At 40,000 feet, Fidelity's Danoff ponders Groupons

Chicago (Reuters) - It's 7:00 a.m. Wednesday and Will Danoff, the pilot of Fidelity Investment's $84 billion Contrafund, is in a steady climb toward 40,000 feet.

Danoff is flying coach, in an aisle seat, on a JetBlue Boston-to-Chicago flight. His destination is Morningstar Inc's annual investment conference, where he will take part in a panel discussion to offer insights from his quarter century of stock picking.

Don Phillips, president of fund research at Morningstar and the panel's moderator, will later tell the conference audience: "Even if you know how good his track record is, you are still taken aback by the brilliance of this manager."

Overall, Danoff manages $100 billion in fund assets as a solo portfolio manager. Contrafund has beaten 97 percent of similar funds over the past decade, according to Morningstar, and doubled the return of the Standard & Poor's 500.

But on the JetBlue flight, the 51-year-old Danoff is feeling anything but brilliant. He knows it's going to be a long day. He left his house in suburban Boston at about 5:00 a.m. (0900 GMT)to catch the flight and won't return home for 20 hours.

"Oh man, I'm tired," Danoff says to no one in particular after settling into his seat. He pulls out a jumble of legal pads and dog-eared papers from a gray backpack and gets to work, taking notes as he sifts through the stack of research.

On one legal pad, the word "Groupon" is underlined.

"Have you ever used one of these Groupons?" he asks the person sitting next to him. After the passenger shakes his head, Danoff says, "Yeah, me neither."

His early morning fuel is black coffee with a side of ice cubes and an in-flight snack of popcorn chips.

"Breakfast of champions," Danoff laughs.

About 10 hours later, Danoff looks a little disheveled and uncomfortable on the stage with Morningstar's Phillips and fellow "quarter-century club" members Brian Rogers, chairman and chief investment officer of T. Rowe Price Group Inc, and Susan Byrne, chairman of Westwood Holdings Group Inc.

But Danoff is clearly enjoying himself as the discussion gets rolling. The panelists commiserate about how stock picking is out of favor. Investors have pulled $170 billion out of actively managed stock funds over the past year. Even Danoff's Contrafund saw $2.4 billion of outflows during 2011, according to Lipper, a Thomson Reuters company.

"We are dinosaurs," Danoff says. "The public has almost given up on stock pickers."

But Danoff clearly hasn't. Earlier in the day, he had meetings in Chicago with executives at Groupon Inc, the daily deals website, and McDonald's Corp. Contrafund held $2.3 billion worth of McDonald's stock at the end of April and $101 million of Groupon stock, according to the fund's latest disclosures.

He compares working at Boston-based Fidelity to working at a busy, big city hospital which has developed a wealth of institutional knowledge and seasoned specialists from seeing so many different types of patients.

On any given day, executives from more than a dozen public companies will visit Fidelity analysts and portfolio managers at offices in Boston. That's where Danoff, an army of analysts and other portfolio managers take the temperature of their investments and prospects.

"I want to be optimistic, but we also have to be realistic," Danoff said in his closing comments on the panel.

He then rattled off a number of areas where he thinks U.S. companies can succeed. He said the United States is the leader in biotechnology and the country could also see a renaissance in the chemical industry.

"I think there are opportunities in this country," Danoff said.

After leaving the Morningstar stage, Danoff found himself surrounded by conference attendees.

"Do you think Apple is overvalued?" one man asked.

Apple Inc was the Contrafund's largest holding at the end of April. Danoff's bet on the company was then valued at $7.7 billion, representing 9.2 percent of the fund's assets.

"It still feels cheap to me," Danoff said. "Do your kids have an iPhone?"

Danoff himself carries a company-issue BlackBerry and a flip phone that was in style several years ago.

He patiently fielded several more questions, including one about Berkshire Hathaway Inc, which represents 3 percent, or about $2.5 billon, of Contrafund's holdings.

"I really like their insurance business. GEICO continues to take market share," Danoff said. He added how Berkshire shares, up 13 percent over the past five years, are trading only 20 percent above their book value.

(Editing by Aaron Pressman and Bernadette Baum)

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