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My latest MoneySense Retired Money column looks at the theme of emphasizing Work-from-Home (WFH) and Stay-at-Home (SAH) stocks to stay partially invested in stocks but to protect against the ravages of a second wave of the Coronavirus bear market. Click on the highlighted headline to access the full column: Unpacking the new Work-from-Home ETFs.
Thus far, investors have enjoyed a solid recovery from the initial shock of March. How much depends on the extent to which they embraced the SAH stocks and avoided those directly in the Covid-19 blast zone: airlines, cruise ships, hotels, office REITs and others directly affected by global lockdowns.
Periodically the latter rebound on renewed Covid optimism, and are hence dubbed “Recovery” stocks. These have so far proven to be short-lived bounces. But the hoped-for V shape economic recovery expected by optimists seems now more elusive as major American states like Texas and Florida lock down again over a second Covid wave. That bolsters the case for a more long-term stance on WFH/SAH stocks like Zoom Video (ZM), DocuSign, Netflix and Teledoc (to name four I own and so far have profited from.)
Don’t forget the big tech companies like Facebook, Amazon, Google and Netflix (FANG) as well as Apple and Microsoft, all of which locked-down consumers rely on to keep a semblance of social interaction going with the outside world.
2 WFH ETFs coming
At least two WFH ETFs are in development to capitalize on this trend, more on which below. But by the time they are available it may be a bit late: most of the names are obvious ones and can be purchased individually at full-service or discount brokerages. There are 100 (mostly U.S.) stocks in Jim Cramer’s Covid-19 index, which he created soon after the pandemic and bear market began.
The 100 Covid-19 stocks include more than just WFH and FANG stocks: they also include pharma and biotech stocks working on a Covid-19 vaccine: Abbot Laboratories, Eli Lilly, Gilead, Johnson & Johnson, Moderna, Pfizer and Regeneron. There are also consumer staple giants like Campbell Soup, Clorox, Colgate Palmolive, General Mills, Kellogg, PepsiCo and Proctor & Gamble.
Rising dependence on home-based technology is why the index includes Cloud and Cybersecurity names like Adobe, Coupa Software, CrowdStrike, Salesforce, and ZScaler. With sports and cinemas shut down, home entertainment is important, hence the inclusion of makers of streaming services from Netflix, Amazon [Prime Video], Apple’s new Apple TV Plus streaming services, or the Spotify music and podcasting service. It also includes video game makers like Electronic Arts, and Take Two Interactive.
At some point we need to exercise – hence Peloton, makers of socially connected stationary bicycles – or order food through takeout services like Chipotle or Domino’s Pizza. Those seeking to market crafts created by home businesses will use services like Etsy.
If late to the WFH party, be warned some of these names have already doubled, making them pricier and riskier than if you acted soon after the index was unveiled. Therein lays the danger of buying the WFH ETFs, depending on when they are actually available.
In the last edition of the MoneySense ETF All-stars we suggested there may be a WFH ETF coming from Direxion, likely with the WFH ticker. Indeed, Direxion filed paperwork for this in April. It will have exposure to infrastructure used by cyber security, cloud tech, project management and online communication companies.
Then in mid-June, the biggest ETF maker of them all – BlackRock Inc. – announced it too is developing a Stay at Home ETF although there few details yet on holdings or fees. The iShares Virtual Work and Life Multisector ETF will focus on firms that benefit from the growing use of remote work, entertainment, education, and wellness products. There are 75 companies in it, but my bet is it will resemble Cramer’s Covid index. If anything, there should be an advantage to buying the individual names before BlackRock’s comes out, as that is bound to increase demand for the ETF and inflate the value of these stocks even more.
That is, of course, assuming a vaccine doesn’t materialize sooner than later and obviate the need for such a theme.
