Market Overview

Work From Home ETF Off To A Wonderful Start

Work From Home ETF Off To A Wonderful Start

The coronavirus pandemic is spawning some innovation in the world of exchange traded funds, but much of that innovation is being sourced in the healthcare sector.

What Happened

The Direxion Work From Home ETF (NYSE: WFH), which debated in late June, departs from the coronavirus ETF fray because it's not a healthcare fund. Rather, as its name implies, WFH emphasizes the work from home theme foisted upon so many workers as a result of the pandemic. Since launching on June 25, WFH accumulated more than $50 million in assets under management, indicating there's investor appetite for this strategy.

WFH follows the Solactive Remote Work Index, a benchmark emphasizing four critical elements of working from home: cloud computing, cybersecurity, online document management and remote communications. In other words, WFH's 40 holdings primarily hail from the communication services and technology sectors.

Why It's Important

What makes WFH compelling is that while the fund was borne out of circumstances created by the coronavirus, the ETF will be useful for investors even after the virus is defeated.

“One of the largest, and increasingly long-lasting, is the trend of remote work, especially working from one’s home for jobs that allow it,” said Direxion in a recent note.

By some estimates, close to 40% of all American jobs can be performed home. That percentage is too high to ignore and with health and legal concerns abound, more companies are entertaining the idea of letting employees work from home for extended periods of time and, in some cases, permanently.

WFH is equally-weighted so its not overly exposed to some of the work from home theme's highest fliers, such as Okta (NASDAQ: OKTA) and Zoom Video Communications (NASDAQ: ZM).

What's Next

Depending on the point of view, WFH's underlying index isn't yet excessively valued and that's saying something given investors' enthusiasm this year for work from home names.

“The Solactive Remote Work Index trades at a slightly higher price to sales multiple** (2.6x) than the S&P 500’s 2.2x, but a discount to the Nasdaq-100’s whopping 4.4x. Remote work’s price to earnings† of 28.1x is less than that of the Nasdaq’s as well,” according to Direxion.

Interestingly, it appears WFH components warrant the higher multiples being assigned because the fund's components are forecast to grow earnings at 20% compared to 13% for members of the Nasdaq-100 Index.

WFH is up 5.63% since coming to market.


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