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ETFs

Work From Home ETF (WFH) Launches: What You Need to Know

The Direxion Work From Home ETF (WFH) puts investors in touch with dozens of companies benefiting from the suddenly accelerating trend of remote work.

Buying "work-from-home" stocks just got a lot easier.

Direxion launched the Direxion Work From Home ETF (WFH) on Thursday, providing the market with its first one-stop shop for a trend that has been around for years but been magnified because of the COVID-19 pandemic.

Remote work might just be a months-old concept to many Americans, but this more flexible work style has been on the rise for years. Direxion points out that even in 2017, 43% of employed Americans were spending "at least some time working remotely."

However, the coronavirus outbreak has rapidly changed the landscape of working from home. More than half of U.S. companies say they plan on making remote work a permanent option in the wake of COVID-19, and three-quarters of Fortune 500 CEOs say they plan on accelerating their companies' technological transformations.

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In other words, the success of tech stocks related to the work-from-home push likely aren't just a flash in the pan.

"We've never faced a global pandemic like this that has impacted countries around the globe," says David Mazza, Managing Director, Head of Product, Direxion. "And unlike a natural disaster where we see a swift economic recovery, how we get there this time will require us to change."

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The WFH exchange-traded fund is the first such product to give investors pure-play access to this rising trend.

A Look Inside WFH

The Work From Home ETF tracks the Solactive Remote Work Index, which focuses on four technologies crucial to keeping companies operating efficiently with remote workforces: cloud technologies; cybersecurity; online project and document management; and remote communications. 

The resulting portfolio is an equal-weighted group of 40 stocks – many of which have become much more popular with investors (and American workers) in 2020.

Top 10 holdings include the likes of Zoom Video (ZM), Box (BOX), Crowdstrike Holdings (CRWD) and Twilio (TWLO). 

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Like many of these companies, Twilio — which provides communications infrastructure for companies — is enjoying the dual burst of COVID-specific demand, as well as pick-up as firms move to improve their technology.

"(Twilio is) powering the communication structure that New York City is going to use for their contact tracing. The voice calls and the SMS text messages are being powered by this firm," Mazza says. "While they're also powering the ability for people to communicate remotely and work more efficiently and effectively, their technology can allow a city which is devastated by COVID to have one of the key requirements to see a successful recovery."

While the fund also holds mega-caps such as Amazon.com (AMZN) and Microsoft (MSFT), equal-weighting the portfolio ensures that they don't have an outsized pull on the fund's performance like they do in cap-weighted products.

Did It Launch Too Late?

One worry, of course, is that WFH – despite a relatively quick development-and-launch period – is behind the 8-ball. After all, many of its components have rallied sharply already in 2020. Consider the already-mentioned companies: BOX shares are up "just" 21%, CRWD and TWLO have more than doubled, and ZM stock is up a whopping 276% year-to-date.

But Mazza notes that the Solactive Remote Index trades at 2.5 times sales and 28.5 times earnings, which is actually lower than the Nasdaq Composite at present. 

That isn't to say that the Nasdaq, and the rest of the market, aren't overpriced, either. "But just saying this basket of securities just because it contains some names, that have had exceptional performance, like Zoom in particular, might not be fully understanding the bigger picture that some of these names are just starting to catch on."

That doesn't mean WFH would be immune to a short-term pullback, however. Especially if a broader market downturn convinces investors to lock in some of their thick profits.

WFH charges a competitive 0.45%, or $45 annually on a $10,000 investment, in expenses. Investors can get a closer look at the fund at the Direxion provider site.

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