After 38 years of working from home, my workstyle is finally "in." You might know it as the "gig economy."
Whether I call myself a freelance writer, independent contractor or solo entrepreneur, I am considered a "gig worker." And the idea behind the gig economy is to not be tied to a single job or even a skill. Instead, gig workers can toil for anyone, from anywhere, and are constantly on the lookout for new money-making opportunities.
Playing the new trend isn't as easy as just buying first-to-mind gig economy stocks like Uber Technologies (UBER) or Lyft (LYFT). They're no longer the bleeding edge, says David Dziekanski, portfolio manager and partner at Toroso Investments.
Toroso is an advisor on the SoFi Gig Economy ETF (GIGE). Companies like Uber and Lyft are "out," Dziekanski says, because in "the next stage of the gig economy you will no longer need large intermediaries to be a platform for your voice." Everyone is truly an entrepreneur. The platforms that win will be those that enable you to work for many different employers, even in different kinds of jobs.
Toroso itself is a virtual company. Dziekanski works from a home office in Brooklyn. Toroso Investments, meanwhile, is based in Chicago, while SoFi is run from Los Angeles.
Dziekanski calls the gig economy an "ecosystem that lets you work disconnected, from seemingly anywhere. It let our economy function through COVID and set up a happier, more productive work culture." On the other hand, he says, "the economy is changing at such a rapid pace you will need to reinvent yourself two or three times over" during a career.
If GIGE's performance is any indication, it's worth paying attention to gig stocks. Since its launch in May 2019, GIGE is up around 95%, roughly twice the total return (price plus dividends) of the S&P 500 over the same time. Read on as we discuss some of Dziekanski's favorite gig economy stocks held in the GIGE portfolio.
Data is as of April 9.
- Market value: $119.0 billion
- 2020 revenue: $9.5 billion
Square (SQ, $261.65), which accounts for 3.6% of GIGE's assets, is Dziekanski's top gig economy stock to buy at the moment.
Square was founded in 2009 to help small merchants, even gig workers, accept credit cards using hardware that plugs into a smartphone. It also offered one price and quick online sign-ups. It's since launched other services, including scheduling, employee management and business analytics.
Additionally, Square has expanded into a host of banking services, starting with loans to its users based on the data it collects.
Square could play the role of the banking industry over the coming years," says Dziekanski. Its Cash App is "not just a payment system, but a bank, with a much lower cost of customer acquisition than a traditional bank has."
Cash now also offers investing, competing with Robinhood, and supports the purchase of fractional shares and Bitcoin – all from the same mobile interface.
Square's value has exploded in the last year, rising over 340%, as revenue doubled during the pandemic. The company is still only half the size of PayPal Holdings (PYPL), another GIGE name, which Dziekanski says means it can grow faster.
- Market value: $109.2 billion
- 2020 revenue: $3.38 billion
Airbnb (ABNB, $179.50) has been a home run for the gig economy and for investors.
Airbnb lets people rent rooms, apartments and houses like hotel rooms, by the day, week or month. It has gotten pushback in many cities for raising rents by taking properties off the market and turning cities into amusement parks. But it has also created jobs in property management.
When Airbnb went public in December 2020, it more than doubled its IPO price of $68 on the first day of trading. Since then, the gig economy stock is up another 25%. It is the second-largest holding in GIGE, with 3.5% of the fund's assets.
Revenue was hit hard by the pandemic but had returned to previous levels by the December quarter. In 2019, the company had $4.8 billion in revenue, growing at 31%, with gross income growth of 29%.
For gig workers, the site means mobility. If you have skills and a computer, Airbnb lets you work from anywhere, changing location on a whim, says Dziekanski.
He calls the site's new "Experiences" offering an underrated growth engine. It was conceived to give tourists things to do – tour guides or cooking classes, for example. Dziekanski, however, recently attended a virtual party featuring a magician in Japan who was a former baker. The party was hosted on Zoom, but the magician was found and paid for through Airbnb Experiences.
- Market value: $150.1 billion
- 2020 revenue: $2.9 million
Shopify (SHOP, $1,227.30) is like an Amazon.com (AMZN) for small business. It lets gig workers set up their own online storefronts, selling goods or services. It has expanded into order fulfillment, video production and in 2019, Spotify added 6 River Systems, which automates distribution centers.
Twice in the last few months I've been solicited by Shopify partners. I bought presents from a neighbor's newsletter, who turned out to be a Shopify merchant, and was asked to set up a shopping account. Then I launched my own Substack newsletter and was solicited to become a Shopify merchant.
These kinds of partnerships helped Shopify double its revenue in 2020, after it increased 50% in 2019. "We think it's going further, servicing loans to both merchants and their customers," says Dziekanski.
Shopify can compete with Amazon for small merchants because "people are more concerned now with who they're making wealthy with their purchases." He says, "many platforms are terrified of Amazon, and feel less competition from Shopify."
Shopify is the third-largest holding for GIGE, accounting for 3.3% of the fund's holdings. Shares of the gig economy stock are up almost 175% in the last year.
- Market value: $53.3 billion
- 2020 revenue: $7.9 million
It has made a turn to the creative side in recent years, letting artists sell their music and, more recently, their podcasts on the platform. Shares of the gig economy stock are up 115% in the last year.
Dziekanski is very excited about the podcast offering. He asks, "Where else can you find a company that allows you to provide your own podcasting platform" and profit from it? "If you're trying to get your brand out, your voice is super powerful as a platform."
Since 2018, Spotify has been acquiring podcasts to make them exclusive on its platform. Its best-known deal is with Joe Rogan, but it has also picked up Gimlet Media – which The Verge favorably compared to Walt Disney's (DIS) purchases of Pixar and Marvel – Parcast and The Ringer, a sports network. SPOT also bought Anchor, a podcast production app.
That's a problem because many big media companies, including Disney, are now producing their own podcasts. And many TV shows are now offered as podcasts or have podcast adjuncts.
But Dziekanski believes this only grows the market, making Spotify a must-have for millions, and giving gig workers access to a huge audience by recording on the platform.
- Market value: $3.7 billion
- 2020 revenue: $139.6 million
Jumia Technologies (JMIA, $37.20) is an African version of Amazon.com, and thus is focused on some of the world's fastest-growing, most entrepreneurial markets.
JMIA is based in Berlin, Germany, with offices in Portugal and Dubai. It currently operates shopping platforms in 11 African countries, with plans to open soon in Ethiopia, Angola and the Congo.
Similar to Amazon.com, JMIA offers a logistics service and like Apple, it has a mobile payments service, JumiaPay.
Jumia's first year as a public company, however, was difficult. Large losses sent shares of the gig economy stock from $40 in May 2019 down to $2.15 roughly a year later. The company exited Cameroon, Tanzania and Rwanda as part of a larger effort to cut costs.
It reduced its losses by half during the back-end of the year, and management says its fulfillment operations are now profitable. Additionally, Jumia recently completed a secondary offering worth almost $350 million.
Jumia is a small holding for GIGE, but Dziekanski believes in it.
"Jumia was able to scale because of the pandemic and see its adoption grow substantially," he says. Jumia helps both producers and buyers in Africa, providing markets for the former and services for the latter. "Jumia has an opportunity to really benefit from the gig economy," Dziekanski adds, and because of its small size, it has enormous room to grow.
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