Before 2020, the term “work-from-home” was a largely foreign concept to most of us.
We got up. We brushed our teeth. We put on work clothes, grabbed a cup of coffee, and sprinted to the office, where we remained until 5pm, and then sprinted back home.
It was a routine that had become second-hand nature for most Americans.
Then Covid-19 struck. And the world changed in a lot of ways – with one of the most widespread and prevalent changes being a disruption to that deeply engrained routine.
Now, we’re all working from home.
Of course, this shift toward work-from-home has created burgeoning demand for on-demand, digital solutions that enable enterprise virtualization.
All of those companies have burst into hypergrowth mode in 2020 — so much so that Wall Street decided to put together a basket of work-from-home stocks and package them into the newly established Direxion Work From Home ETF (NYSEARCA:WFH).
Since its debut in late June, that Work From Home ETF has already risen roughly 25%.
Still… there are some concerns on Wall Street that the work-from-home era will wind down in 2021, as countries across the globe broadly administer highly effective vaccines and we inch one big step closer toward closing the book on the Covid-19 crisis.
The reasoning is that as Covid-19 becomes old news, employees will return to the office, and demand for remote work solutions will taper off.
But that’s not going to happen.
Because – although Covid-19 was the impetus for enterprises adopting remote work – companies have discovered over the past few months that remote work offers various long-lasting and critical advantages over legacy in-office work.
- A Stanford study found that working from home increases employee productivity by 13%, thanks to those employees working longer hours at home, with fewer breaks and interruptions, and in a quieter environment.
- A FlexJobs study found that working from home reduces costs for employees by ~$4,000 per year, thanks to less commuting, fewer dine-out lunches/dinners, and a reduced need for a professional wardrobe.
- Global Workplace Analytics calculated that, on average, working from home just half the time saves employers $11,000 per employee, mostly through lower real estate costs.
In other words, remote work boosts employee productivity, saves the employee money, and saves the employer money.
Those are huge value adds – and in light of such enormous value adds, one has to ask: Why go back?
Of course, there are reasons to go back.
Humans are social creatures. We like to be around each other. Indeed, more social interactions are shown to have a positive impact on mental health. Plus, going back to the office will improve work/life balance, which some studies show has been thrown off course by remote work.
So… in the big picture… there are reasons for employees and employers to continue to lean into remote work… and reasons for them to return to the office.
That’s why the future of work is what I like to call “Hybrid Work.”
It will be a mix of today’s “everyone is working from home” world, and yesterday’s “everyone is working at the office” world.
Employees will return to the office. But they won’t go to the office as much as they used to, and most employers will likely adopt something like a rotating, flexible 3-days-in-office, 2-days-remote-work weekly schedule.
It’s a best-of-both-worlds solution, which optimizes productivity, reduces costs, and preserves employee well-being and mental health. It’s simply the best path forward.
That’s why – according to a recent Gartner survey – 82% of companies plan to adopt this Hybrid Work future in a post-Covid world.
Of course, the investment implication here is simple…
Because the shift toward enterprise virtualization is permanent, demand for remote work tools and services will continue to rise over the next decade – so, if work-from-home stocks drop in late 2020/early 2021 on overstated demand concerns, buy the dip.
Names like workflow management leader Asana (NYSE:ASAN), digital app manager Appian (NASDAQ:APPN), business intelligence software provider Domo (NASDAQ:DOMO), observability pioneer New Relic (NYSE:NEWR) and DevOps company JFrog (NASDAQ:FROG) look particularly attractive to me on future dips.
These are companies that – over the next five years – will define a new era of Hybrid Work.
Along the way, their stocks will score hypergrowth investors enormous returns.
So… if those hypergrowth stocks start to fall in the near-term… that’s a long-term bullish signal.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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