In managing Fidelity's Software and IT Services Portfolio, Ali Khan tries to look for companies that can grow consistently and steadily for years to come.Fidelity fund manager Ali Khan runs the firm's Software and IT Services Portfolio, which has been one of the best performing tech funds over the last five years.One key piece of his strategy is to focus not on the fastest growing companies, but on those that have the potential to grow significantly and steadily for years on end.
. Part of his winning strategy has been to focus on companies that have the ability to grow steadily for years to come, rather than on those that are posting amazing growth rates in the near term. Companies like Salesforce and Adobe, which have each consistently posted revenue growth above 20% for years on end, epitomize his ideal stocks — and what he looks for in younger tech companies.Part of the reason he prefers such companies over the spectacular growers has to do with valuation.
The other reason Khan tends to shun those companies with superfast growth rates is that they often don't have the potential to sustain strong growth into the future. The market they play in just isn't big enough, or their competitive advantage isn't sufficient enough to defend them against potential competitors. So as they sign up a big swath of their potential customers, or as their competitive distinction dwindles, their growth rates hit a wall.
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