The Covid-19 pandemic closed offices around the globe in March. Ever since, we’ve all been working from home. Demand for remote work solutions has consequently soared. So have work from home stocks, which in turn gave birth to the Direxion Work From Home (NYSEARCA:WFH) ETF.
Direxion launched its new thematic ETF in late June to allows investors to broadly gain equal-weighted exposure to all of today’s hottest work-from-home stocks.
I’m talking cloud communications provider Twilio (NASDAQ:TWLO), which comprises 4% of the WFH ETF. There’s also video teleconferencing giant Zoom (NASDAQ:ZM), identity security solutions provider Okta (NASDAQ:OKTA) and 5G-enabled remote work connectivity provider Inseego (NASDAQ:INSG), each which comprise about 3% of the Work From Home ETF’s portfolio.
Some believe the Work From Home ETF is a fad. Bears argue it’ll fall off a cliff once the pandemic passes and employees return to the office.
But many employees aren’t going back to the office, ever. The work-from-home trend is here to stay long after Covid-19 passes.
So buy the Work From Home ETF. This is a long-term winner.
Here’s a deeper look.
Working From Home is More than a Fad
It’s very easy to say that the emergence of Covid-19 closed offices across the world, and so when Covid-19 passes and offices reopen, employees will go back to work and this whole work from home era will come to an end.
But that viewpoint is short-sighted.
In world where the internet connects us, instantaneously, regardless of where we are, why do we need to go to an office to work? For some, the answer is obvious. Restaurants. Hotels. Retail. All those businesses need employees on site.
But banks? Tech companies? News publishers? I can fill out a spreadsheet on Microsoft (NASDAQ:MSFT) Office 365, write up a memo using Google Docs, send an update to my team via Slack (NYSE:WORK), hop on a Zoom video meeting, and call it a day.
All from my home.
And this is before 5G. Which will only improve connectivity globally, and make remote work solutions truly seamless and on-par with in-office solutions.
So why go to an office?
Many companies are asking that same question. Their employees can be just as productive from home, so they can get rid of the office and significantly reduce their rent expenses.
Seems like a win-win.
These are among the most innovative, forward-thinking companies in the world. It reasons that they’d be first movers in the permanent work-from-home transition. More companies will follow in the footsteps over the next several months and years.
And, come 2025, the office won’t be a thing of the past, but it’ll surely be much less common that it is today.
Work From Home Stocks Have Big Upside
As the office loses relevance over the next several years, work from home stocks will broadly head higher, creating a rising tide for Direxion’s WFH ETF.
Every company in the world will adopt some form of cloud communications platform. Services like RingCentral, Slack, and Microsoft Teams will become ubiquitous across the enterprise landscape.
Most companies will opt for a video conferencing platform, and tools like Zoom will become more broadly adopted.
Most companies will also opt for a cloud-hosted security solution built to accommodate remote work environments, like Okta’s Identity Cloud platform.
For creative professionals, Adobe’s cloud-hosted Creative Cloud solutions will become a must-have.
In other words, all of the companies in Direxion’s Work From Home ETF will see increased demand over the next several years. This rising demand will translate into growing revenues and profits. That will translate into higher stock prices.
The WFH ETF is a long-term winner.
Bottom Line on the WFH ETF
The emergence of Covid-19 inspired the remote work trend. But the disappearance of Covid-19 won’t kill the trend.
For many, working from home is a permanent lifestyle change. The office will gradually lose relevance over the next several years. As it does, work from home stocks will stay in rally mode.
And Direxion’s Work From Home ETF will, too.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long TWLO, OKTA, AMZN, ADBE, FB, MSFT, SQ, and SHOP.