AMAZON WOMAN
From her Seattle perch, Nancy Zevenbergen has beaten the market for three decades by spotting disruptors early and sticking with them. Now she’s inviting public investors along for the sometimes wild ride.
Nancy Zevenbergen operates her marketbeating $2.4 billion-in-assets investment firm from a canned-sardine-tight corner office overlooking Seattle’s Space Needle and the Olympic mountains. Inside this 400-squarefoot “war room” is a pentagonal desk where she and the four other members of her stock-picking team use 15 computer screens displaying stock market and financial data. On the walls hang dry-erase boards with Zevenbergen Capital Investments’ positions and corkboards holding newspaper and magazine clippings relating to long-held winners, such as Amazon, Tesla and Netflix. There’s even an unframed “Frank Underwood for President” poster—a nod to Netflix’s House of Cards hit.
The team listens via speaker to the earnings calls of the disruptive, entrepreneur-run businesses Zevenbergen favors. Together, she figures, they have a better chance of catching nuances beyond the numbers. Is a CEO excited about a new revenue stream? Losing faith in his strategy? Such cues are crucial because Zevenbergen is a “high conviction” investor who discounts value measures like price-toearnings ratios in her hunt for “dreamers with way bigger brain capacity than I have” and the skill to execute. “My job,’’ she says, “is maybe without full information to make an investment alongside these folks and then track how they are doing.”
It’s a job that Zevenbergen, 58, has excelled at since setting up her own investment shop at the age of 28. To pay for college, she worked part-time as a teller at Seattle’s Rainier Bancorp. After graduation, she was hired by the bank’s trust department and began managing money. In 1986 she was assigned to vet the initial public offering of local phenom Microsoft. When the IPO shares popped, the trust department quickly sold its allotment to lock in clients’ gains—a tad shortsighted considering Microsoft’s 43,000% return since 1987.
The experience was formative; Zevenbergen saw the huge opportunities created by PCS and the wisdom of holding growth stocks for the long haul. She left to start her own firm with one client and $500,000 in assets and worked from her living room while her husband, mother and a nanny watched her infant and toddler.
By 1992, Zevenbergen had an office, 51 clients and $212 million under management. She needed help and recruited Brooke de Boutray, whom she’d befriended a decade before when both were studying for their CFA designations. Now 62, De Boutray had also been in the right place at the right time. After the 1984 breakup of AT&T, she was assigned by a regional bank to cover sleepy telecoms—just before cellular service and local entrepreneur Craig Mccaw made the beat exciting. In 1994, Zevenbergen added Leslie Tubbs, now 58, a banker-turnedanalyst who specializes in financial and biotechnology stocks. The three women still form the core of the stock-picking operation, with two younger male analysts added in 2011.
Despite dramatic losses during the dot-com bust and the financial crisis, Zevenbergen’s aggressive strategy has produced impressive long-term results. Her flagship growth equity fund has returned 11.5% annually, net of fees, since 1987, beating the Rus-
sell 3000 Growth Index’s 9.8% return. A smaller, even more growth-focused Ztech fund has returned 12.9% annually net of fees since 1994, trouncing the Russell 3000 Growth’s 8.8% return during that period.
In August 2015, Zevenbergen launched two mutual funds. The growth-heavy Zevenbergen Genea Fund—with an expense ratio of 1.4% and minimum investment of $2,500—ranks in the top 1% of its category with a one-year return of 50%. The slightly less aggressive Zevenbergen Growth Fund is up 30% over the past year, ranking in the top decile of its category. In addition to proven winners like Amazon, the Genea Fund holds concentrated bets in Shopify and South American e-commerce giant Mercadolibre.
The mutual funds have attracted just $10 million and are not for the faint of heart—or the impatient. “If you just want to maintain wealth, go for diversification and go passive,’’ Zevenbergen says. “If you want
to create wealth, own growth companies and concentrated portfolios. But recognize that they cannot perform every day or every week or every month or even every quarter.” She calls investing with a less than fiveyear time frame “truly speculative.”
Zevenbergen herself shows extraordinary patience—if she believes in an entrepreneur. She acquired the firm’s $167 million Netflix stake at an average split-adjusted cost of $6, mostly prior to 2010. The stock rose to $43, then plunged to $9 in 2011 after cofounder Reed Hastings attempted to spin off Netflix’s cash-cow Dvd-rental business to hasten its streaming growth. Hastings reversed course, and Zevenber- gen added to her holdings; Netflix now trades at $185.
Note that Zevenbergen bets on entrepreneurs and not just ideas. She shuns companies run by “rent-aceos” in favor of founders who are ready to make “outrageous investment” decisions that may take years to pay off. And she can be forgiving. She bought Amazon in 1997 when it was newly public but sold when it tanked in 2000. She bought again in 2007 and today has a $157 million position in Amazon with a $60-ashare average basis, meaning her bet on Jeff Bezos has risen sixteenfold.
High conviction? She bought Facebook’s initial public offering at $38 and added to the stake after the social-networking company fell by half after its debut. Her $138 million position is up sevenfold. Then there’s Tesla, which trades at 16 times what Zevenbergen paid. Skeptics abound: $10 billion in short money is betting against it. Zevenbergen is unfazed. She says she worries more about finding the next great entrepreneur.
That search takes Zevenbergen well beyond tech and beyond her Seattle base (though she was early into local winners Starbucks and Costco). In 2013, while screening for transportation companies that might benefit from Amazon’s growth, her team came upon Greenwich, Connecticut-based XPO Logistics, which was growing rapidly through acquisitions. CEO Bradley Jacobs had already done successful roll-ups in construction equipment and waste management. She started buying and added to her position after XPO’S September 2015 acquisition of trucker Con-way hammered its stock, bringing her average cost down to $32 a share. It now trades at $63.
That’s not to say Zevenbergen never bets wrong or loses patience. She has recently liquidated positions in Pandora Media, Lendingclub and Under Armour at a loss and has Snap and Blue Apron on watch.
Jim Martin, the former chief investment officer for the $1.1 billion-in-assets Murdock Trust, put $5 million with Zevenbergen in 1994 and stuck with her through the bad years. The trust now has $94 million under her management. “For investors who can stand that volatility, we’ve been rewarded,” Martin says, adding that with Zevenbergen’s high conviction you get “as much manager skill as possible to the bottom line.”
“Steward for the long term. It’s not always easy, but you do it.” —GINNI ROMETTY