- The Zevenbergen Growth Fund is up 16% this year and outperforming every single other US equity mutual fund.
- It was well-positioned in many of the companies that are booming because of the coronavirus pandemic, social distancing, and working from home.
- In an exclusive interview, one of the fund’s five portfolio managers detailed seven stocks that are supercharging their fund’s performance, and explained why these names should continue performing well even after the crisis.
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Like many other fund managers, Anthony Zackery did not factor an unprecedented global pandemic into his long-term stock-picking strategy.
But it turns out the themes he and four co-portfolio managers invested in ahead of the coronavirus crisis were optimal for a moment like this. Their Zevenbergen Growth Fund has returned 16% after fees this year, besting every other US equity mutual fund, according to Morningstar data.
Their performance trounced the S&P 500‘s 15% decline year-to-date through Monday and outpaced their benchmark index by 20%.
“It just so happened that the corona crisis played into the themes we identified three to five years ago,” Zackery told Business Insider.
These themes like ecommerce, video streaming, software as a service, and digital payments were already advancing before the crisis. But the requirement to be socially distant and work from home across the world has made companies that provide these services essential to how the world operates today.
In addition to being in the sweet spot of pandemic-related themes, the fund is reaping from its bet on founder-led companies that prioritize growth over profits. This partly explains why Tesla — founded by Elon Musk — is the fund’s largest weighting and one of the biggest contributors to its performance over the past year.
Similar companies that are run by prominent founders have paid off including Reed Hastings’ Netflix and Jeff Bezos’ Amazon.
For the most part, the fund’s dominance this year is thanks to companies that are flourishing due to the coronavirus pandemic. Zackery detailed seven examples in the fund to us, and explained how they will continue to benefit even after the pandemic. They are listed below in order of their year-to-date returns, and all quotes are attributable to Zackery.
1. Teladoc (+102%)
“As the healthcare system is strained because of COVID-19 and patient treatment, that hasn’t stopped people from getting sick or rolling an ankle or getting the normal flu.
“As insurers, healthcare systems, and doctors push non-corona cases digitally, Teladoc has benefitted.
“Their management team reported they’re seeing or facilitating 20,000 patient visits a day, which is double from where they were about a month ago.”
2. Tesla (+67%)
“They raised funding at an opportune time and we believe that their average customer is relatively unaffected by COVID.
“One surprising aspect about Tesla is that their stock and their sales have remained resilient as the price of oil and energy have fallen through the floor. That kind of goes to show that Tesla is where the world is headed, especially as more investors and consumers are focused on sustainability through the process of ESG and spending and investing according to one’s values.”
3. Chewy (+50%)
“We believe that pet spending is relatively resistant to a recession. We believe people will cut back in areas such as apparel, dining out, travel before they cut the quality of nutrition fed to their pets. So we think Chewy will do well during the crisis, but also because of the value proposition it offers consumers, may end up stronger after the virus stabilizes.”
4. Shopify (+43%)
“There’s been a greater emphasis on needing an omnichannel approach. Shopify provides the tools for small and medium-sized merchants to adapt to the new world and handle the surge in business.”
5. RingCentral (+40%)
“As businesses wrestle with how to make sure employees communicate, collaborate, and maintain productivity throughout the day, they’re relying on companies like RingCentral, Zoom Video and Microsoft to get that done.
“We’re less sure that office real estate or the office environment will go back to the normal pre-crisis. Business managers will start to come around to the idea that centralizing everybody in one office space is an old concept.
“Do we need 100 or 1,000 people in one place to get things done?”
6. Netflix (+33%)
“The greatest advertisement for Netflix is everybody on Twitter saying ‘I’ve finished the Netflix catalogue.'”
“We still believe that the whole concept of appointment viewing is behind us. We still believe that the ability to access a content library whenever you want it and access a full season is the way to go.
“There has been, in the past, conversation about competition, namely Disney+. But I think consumers and investors have come around to the fact that the Disney+ content library has no match to the breadth and the depth that Netflix has. So we think Netflix will continue to gain mindshare on the streaming side.”
7. Okta (+27%)
“The COVID crisis has intensified the need for robust security — and Okta is where the puck is headed.
“Network infrastructure has shifted to an identity-first approach and Okta, as the large incumbent in that space, should do well.”
