Even if they’re not working from home themselves, investors are hearing plenty about work-from-home stocks over the course of the novel coronavirus pandemic. The Direxion Work From Home (NYSEARCA:WFH) ETF debuted last week as the first fund dedicated to work-from-home stocks.
Whether it’s video conferencing with Zoom Video Communications (NASDAQ:ZM), signing documents on a computer via DocuSign (NASDAQ:DOCU) and much more, work-from-home isn’t just a theme. It’s a growing trend and where there are compelling themes and trends, an exchange traded fund usually isn’t far behind.
The WFH ETF is the latest in a series of recently launched ETFs inspired by the effects of Covid-19, but the Direxion fund is the first to take a route other than health care.
WFH follows the Solactive Remote Work Index and charges 0.45% per year, or $45 on a $10,000 investment. That’s pricier than say a traditional broad market ETF or index fund, but the rookie fund’s fee compares favorably with the broader universe of thematic offerings.
The fund holds 41 stocks, including Zoom, Cisco (NASDAQ:CSCO), Amazon (NASDAQ:AMZN), Dropbox (NASDAQ:DBX) and Slack (NYSE:WORK)
Assessing Credibility and Viability
Something I’m fond of saying regarding thematic ETFs, and I say it because it’s important, is that investors must assess the credibility and viability of the underlying theme. That evaluation takes on added importance with funds, including the WFH ETF, that are born out of coronavirus circumstances.
After all, the pandemic will eventually be put to bed, either by way of a cure, vaccine and folks taking social distancing protocols seriously or a combination of those factors. For investors, the end game is not be left holding a stock or ETF that’s dependent on the existence of Covid-19 when the virus becomes a thing of the past.
Fortunately, WFH has credibility and viability. Not long after the coronavirus became a daily issue for Americans to contend with, professors at the University of Chicago Booth School of Business conducted a work-from-home study, discovering that 34% of all U.S. jobs combining for 44% of all wages earned in this country could “plausibly” be performed from a place of residence.
Bolstering the case for the WFH ETF is that some experts disagree with the Booth School study, saying that 34% estimate is conservative. Obviously, it depends on the job. A casino staffer in Las Vegas needs to be in the casino, but workers in accounting or human resources at the same company can work from home.
WFH’s credibility and viability are further enhanced by an underlying structure revolving around four central work-from-home themes: cloud computing, cybersecurity, online document and project management and remote communications.
That methodology speaks to the utility of WFH in a post-virus world. For example, Covid-19 could be cured tomorrow, but that won’t diminish the long-term thesis for WFH components, such as Twilio (NYSE:TWLO) and Okta (NASDAQ:OKTA).
The reason is simple: spending on cloud computing and cybersecurity is necessary regardless of pandemics and was growing prior to the emergence of Covid-19.
Bottom Line on the WFH ETF
There are some factors that bode well for WFH’s long-term viability. First, the pandemic is prompting investors to reassess the balance sheets and liabilities of companies. For some firms, reducing or eliminating real estate expense is an avenue for cutting costs without having to reduce headcount.
In other words, don’t be surprised if the number of remote workers continues increasing after Covid-19 fades away. Second, as the Centers for Disease Control and Prevention outlines, there are a slew of protocols and potential legal pitfalls that come with reopening offices in the current environment.
For some employers, it’s simply more efficient and more cost-effective to tell staffers to work remotely. As WFH proves, the technology is here to make increased working from home a reality.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.