Curious about Zevenbergen Capital’s investment perspective? Check out an excerpt from our quarterly client letter for our thoughts on 2Q20.
Zevenbergen Capital
2Q20 Equity Review & Perspective
Re-emergence: Attempting to reboot after COVID-19, the U.S. economy slowly emerged from arguably the worst recession in history in phasic fashion, with states reopening activities (limited) and lifting severe restrictions. Dueling stories of economic improvement and the reality of still significantly depressed metrics highlighted a profound trend brought about by the pandemic. With the strong rebound from March lows (supported by a series of fiscal and monetary stimulus measures), equity gains appeared increasingly divorced from economic reality. Conventional wisdom would explain the market’s forward-looking tendency to have already accounted for the expected cataclysmic drop in 2Q20 activity. On the other hand, the pandemic has likely forever changed the landscape of business and consumerism, coincidentally playing to the strengths of those able to invest and innovate, pivot and shift, emerging successfully with accelerating growth relative to competitors. COVID-19 acted like an accelerant to ZCI’s existing secular investment trends, as the wake-up call to hasten digital transformation pulled demand fast-forward compared to preceding decades.
Originally expected to take two-to-four years to develop, the rapid adoption of trends where we’ve been investing for some time (ecommerce, cloud adoption, contactless payments, digital entertainment, cyber security, ecommerce platforms) appeared to accelerate into months (COVID years, we call them). Technologies that are faster, less expensive and more productive have been galvanized by the crisis. Investors who favor economic certainty might not find much to be constructive about in the near term (unfortunately, a large contingent may even be market side-lined). From our view, the faster pace of digital transformation in the economy is here to stay, and we remain enthusiastic participants.