Curious about Zevenbergen Capital’s investment perspective? Check out an excerpt from our quarterly client letter for our thoughts on 4Q19.
Zevenbergen Capital
4Q19 Equity Review & Perspective
Now what? After a year of stock market nirvana, a certain contingent of Wall Street participants begin to panic that gains came too easy. Those who heeded warnings about euphoria after the extraordinary surge in the first quarter missed one of the best years on record and a double-digit jump at the end of the year. Gains don’t always beget losses in the stock market. If history serves as a guide, bullish momentum could continue (returns may not meet the impressive rise of 2019; however, another positive year might be in the offing). While shares appreciated faster than profits over the last twelve months, earnings growth has outpaced multiple expansion across all sectors over the last two years. Current valuations, while above long-term averages, appear reasonable at a time when trade tensions are cooling, profits for 2020 are expected to rebound (rising earnings are typically the most dependable fuel for sustained stock price gains) and economic fundamentals appear more solid. The past two years both exemplified the point that predicting short-term stock prices is incredibly difficult to get right, and impossible to manage consistently. ZCI is no investment chameleon, changing colors with environment or sentiment shifts. Investing in terms of decades requires a commitment to companies investing for their futures, despite pressures compelling them to take a short-term view. We are under no illusions; our path deviates from many of our peers. ZCI’s outlook? Still bullish after all these years.