If you woke up on Monday to a different work routine, you’re not alone. Tens of millions of workers are now isolated from their colleagues, not by choice, but by order. Investors are looking for some bright spots in what has become a bear market. That makes it worth your time to look at some of the networking stocks that make working from home a reality.
The permanent impact of the coronavirus on global business will be studied for years. But in the here and now, the national effort towards social distancing is displacing many workers from their offices.
However, telecommuting is not a recent phenomenon. The dot-com boom of the late 1990s brought about a convergence of hardware and software. This convergence made remote work possible. And in some cases, it can be a seamless alternative to being in the office.
Telecommuting gained even more appeal after the events of Sept. 11, 2001. More and more companies started to redefine “essential” business travel. And as recently as March 17, Treasury Secretary Steven Mnuchin announced that the impact on airlines due to this virus is worse than what the industry experienced on 9/11. While Secretary Mnuchin is referring to the present economic impact, he might be more prescient than he even knows.
That said, here are three networking stocks that you should consider for your portfolio.
Networking Stocks to Buy: Cisco (CSCO)
If productivity stocks are the fuel for remote work, traditional networking stocks like Cisco (NASDAQ:CSCO) are the engine. Cisco is one of the leading manufacturers of VPNs (virtual private networks). In fact, Mark Rounds — instructor of management information systems at the University of Idaho — said in an email to InvestorPlace, “… in my opinion, we will see a long-term trend towards using VPNs to work from home.”
However, as Rounds points out, for these networks to operate effectively a company has to have the proper work-from-home infrastructure. That’s where Cisco comes in.
“Coronavirus may expose the underlying weaknesses of the existing telecommuting infrastructure on both the corporate and public side. Companies supplying the hardware that will be used to build a more robust infrastructure will increase in value and the prices of their products will be driven higher. Look at companies providing routers, switches, cabling (especially fiberoptic) and the like.”
Moreover, as InvestorPlace contributor Ian Bezek wrote about Cisco, the company is also seeing nice growth in its security business. And while this business has a lot more competition, Cisco can benefit from being able to provide a secure, and functional work-from-home infrastructure. And like many stocks right now, Cisco stock is selling at a heavy discount from its 52-week highs.
I could write an entire article on the necessity of office meetings, but they aren’t likely to go away. However, with Zoom (NASDAQ:ZM) employees can interact face-to-face from their homes.
But as the virus outbreak is making clear, there is an application for Zoom software beyond business. Colleges, universities and even children’s playgroups are driving up demand for the company’s software.
Currently, ZM stock is up more than 85% in 2020. And with companies doing their part to keep employees home for the foreseeable future, the company may still have a long runway for investors.
Additionally, despite the fact that the stock is not cheap, at least one analyst feels the stock has room to grow.
“We think Zoom’s exceptionally easy to use meetings product has both enabled and benefited from a long-term secular shift towards working from home,” says Needham analyst Richard Valera. “We think Covid-19 is driving an enduring application of this shift. In the near-term, our checks confirm significant increases in business activity, especially in Covid hotspots, which admittedly could be mitigated by delays in closing larger enterprise deals.”
Networking Stocks to Buy: Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) Teams is the company’s entry into the productivity software space. Like its rival Slack (NYSE:WORK), Teams is a combination of social networking meeting business productivity. The productivity software allows workers to instant message and share files. And as Microsoft continues to expand its presence in cloud computing via its Azure platform, it will have an easy way to introduce customers to Teams.
Truth be told, not even a company like Microsoft has been immune from the market selloff. And, in fairness, it will take a couple of quarters to see if productivity software has legs beyond the current crisis.
But, unlike Slack, Microsoft has a presence in many businesses. Therefore, Teams would be an add-on investment that Microsoft can probably offer at a discount, at least initially. That’s another luxury that Slack cannot afford.
The real question is how much of an impact will productivity software really have. My own experience with it is mixed. On the one hand, it does keep my inbox a lot cleaner. On the other hand, it gives employees to banter back and forth about work-related and non-work related topics. And that can defeat the purpose of having a “productivity” tool.
However, giving companies more control of their sensitive information is a benefit that Microsoft is in position to capitalize on.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019. As of this writing, he did not hold a position in any of the aforementioned securities.