Coronavirus Investing: Pureplay Work-From-Home ETF Hits Market

Thanks to coronavirus-led stay-at-home trend across the globe, the work-and-learn-from-home trend has gathered steam. At least, the service and education sectors are mitigating the economic and social impact of the pandemic in this manner.

Although lockdowns are gradually being lifted, the fear of a second wave of virus contagion has now taken markets in its grip. As a result, the work-from-home or WFH policy will likely remain in place over the long haul.

There are some companies which are benefitting from this shift in working style.Twitter TWTR has allowed employees to keep working from home “forever” if they wish to (read: Twitter Promotes Permanent WFH: ETF Areas to Gain).

Twitter offices will remain closed until at least September, except for some necessities. The opening would also be done in a measured manner. Other major tech firms, including Facebook (FB) and Alphabet (GOOGL), have extended their work from home policies through the end of the year.

This probably encouraged Direxion to launc for a pureplay work-from-home ETF that is centered on stocks that stand to gain from the work-from-home trend. The fund hit the market on Jun 25, under the ticker code of WFH.

Inside WFH

The fund tracks the Solactive Remote Work Index, which comprises 40 U.S. listed securities and ADRs that have considerable exposure to companies that specialize in providing work-from-home-friendly products. The areas are remote communications, cyber security, project and document management, and cloud technologies. The expense ratio of the fund is 0.45%.

Twilio (4.17%), Inseego (3.95%) and Crowdstrike Holdings (3.76%) are the top three holdings of the fund. Software takes about 63.33% of the fund while IT Services (12.73%) and Communications Equipment (8.73%) round out the top three positions.

How Does it Fit in a Portfolio?

The WFH trend bodes well for the computer industry as sales of PCs, laptops and other kinds of computer peripherals are on the rise. Demand for computers at both commercial and retail levels is soaring as well.

Along with the rising computer sales, demand for Internet services and cloud has been growing. Rising computer sales and cloud computing should boost demand for chips materially (read: Rising Work-From-Home Trend to Boost 5 Industries & ETFs).

If these were not enough, the trend should bode well for data-center REITs, electronic retailers and home furnishing stocks too. While WFH’s investment objective is “compelling,” the valuations of the tracked companies likely reflect the market’s enthusiasm for this theme, according to Morningstar Inc.’s Ben Johnson, as quoted on Bloomberg.

Is There Any Competition?

At the current level, there is no direct competitor. However, Cloud-based ETFs like WisdomTree Cloud Computing Fund (WCLD and Global X Cloud Computing ETF CLOU may pose competition to the newbie.

Today, roughly 33% of the work load is managed on cloud lately. The share is likely to rise to 55% by 2022, per ETFMG. Remote working applications with the shift to cloud computing is a key driver of the space.

Plus, Internet ETFs too may pose competition to the fund. ARK Next Generation Internet ETF ARKW and O’Shares Global Internet Giants ETF OGIG are prominent funds in this segment.

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