Zevenbergen Capital 1Q20 Perspective

April 15, 2020ZCI Blog

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Curious about Zevenbergen Capital’s investment perspective? Check out an excerpt from our quarterly client letter for our thoughts on 1Q20.

Zevenbergen Capital

1Q20 Equity Review & Perspective 

The Day the Earth Stood Still: “Unprecedented” was a frequently used expression during 1Q20, but did not adequately capture the caliber of events that unfolded.  As COVID-19 spread throughout the globe, concerns amplified regarding the outbreak’s human toll.  Growth of confirmed infections elicited unprecedented government responses at home and abroad.  With more than 75% of the U.S. population under government-ordered lockdown (along with social distancing measures), the consequences are expected to have a crushing impact on GDP, as public safety directives created breathtaking disruptions to the economy and employment.  Central banks were the first to act to mitigate economic impact.  Aggressive from the outset, the Fed slashed interest rates and launched several rounds of quantitative easing, initiating a host of funding facilities to keep liquidity flowing.  Global financial markets corrected swiftly and sharply past bear market bearings.  U.S. indices plunged from all-time highs to bear market in record time, triggering seldom used trading circuit breakers and multiple 1,000-point moves for the Dow.  While central banks were prompt to respond, fiscal intervention took longer.  After two stimulus efforts failed to match up to the enormity of the crisis, U.S. legislators eventually passed the largest emergency aid package in history.  Simultaneously, economists and investors tried to update forecasts, recognizing the task was to some degree futile given incomprehensible uncertainties.  There is no denying a sharp downturn in the economy has already occurred; however, markets are forward-looking barometers.  Just as the panic that began on Wall Street occurred well before it was felt on Main Street, markets may rebound well before the world stabilizes, looking towards easier comparisons, record stimulus and monetary easing that should facilitate recoveries across the globe.  The solutions to the current pandemic may not be obvious yet, but the building blocks are increasingly in place.  There are no winners in a global pandemic.  However, the crisis appears to be a watershed moment for expediting the adoption of specific themes within the corporate and consumer landscape, namely ecommerce, digital/online services and delivery, cyber security and cloud migration.

As always, we continue to diligently assess developing events surrounding the coronavirus and its implications for the economy, markets and individual securities.  Active management shines in times like these and ZCI remains determined to use volatility and dislocation to position portfolios to outperform broad markets.  It’s important during “unprecedented” times to step back and maintain perspective.  Investing is a long-term activity.  Clearly, many companies will be impacted in the near term and the markets have factored this heavily into stock prices.  We have made few changes to our portfolio, primarily adding to holdings we admire at depressed prices.  Our focus continues on companies with growing opportunities, competitive advantages and strong balance sheets, that may not only survive but become a “winner takes most” in their respective industries when the crisis is over.  We are heartened by the advances in science, testing tools and vaccine hopefuls.  At our core, we are a nation full of ingenuity and we will win against the virus.  Though we are living the “quarantine life”, we remain at your service.  #wecandothis