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A Pureplay Work-From-Home ETF in the Offing

·3 min read

With a number of countries under lockdowns in order to contain the spread of the coronavirus, the trend of working-from-home has picked up. At least, the service sector is trying to mitigate the economic and social impact of the pandemic in this manner.

Investors should note that success of this policy will make it a durable working style over the long haul. There are some companies which are benefitting from this shift in working style.

This probably encouraged Direxion to file for a pureplay work-from-home ETF that is centered on stocks that stand to gain from the work-from-home trend. The fund will trade under the ticker code of WFH, once approved.

Inside WFH

The fund will track 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 has not been disclosed yet.

How Does it Fit in a Portfolio?

The 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. Microsoft has seen a whopping 775% surge in its Cloud services in regions under lockdown. 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. Wayfair W, an online seller of home goods products, saw its gross revenues double in March as demand for products like home office furniture and mattresses jumped. Meanwhile, according to analysis done by ACI Worldwide, global online retailers saw a 26.6% year-over-year surge in electronics sales in March.

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?

Cloud-based ETFs likeWedbush ETFMG Global Cloud Technology ETF IVES, WisdomTree Cloud Computing Fund (WCLD), Global X Cloud Computing ETF CLOU and First Trust Cloud Computing ETF SKYY may pose competition to the newbie, if approved. 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. UP Fintech China-U.S. Internet Titans ETF TTTN, KraneShares CSI China Internet ETF KWEB (though the fund is China-centric) and ARK Next Generation Internet ETF ARKW are a few winners in this segment (read: Amid the Tech Slump, Internet ETFs Most Resilient to Virus).

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Wayfair Inc. (W) : Free Stock Analysis Report
 
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
 
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
 
KraneShares CSI China Internet ETF (KWEB): ETF Research Reports
 
UP Fintech China-U.S. Internet Titans ETF (TTTN): ETF Research Reports
 
ETFMG Drone Economy Strategy ETF (IVES): ETF Research Reports
 
Global X Cloud Computing ETF (CLOU): ETF Research Reports
 
WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports
 
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