Economic reopening has been taking place for several months now. Employees are heading back to offices, either full-time or in hybrid capacities. Gyms and movie theaters are reopening their doors too.
With that and more, it’s not surprising that some market observers are getting pensive about previously hot stay-at-home stocks, including many that reside in the ARK Next Generation Internet ETF (NYSEArca: ARKW).
In a Wednesday interview with CNBC, ARK founder Cathie Wood said the long-term outlook for some beloved stocks associated with the stay-at-home trade, such as Roku (ROKU), Teladoc (TDOC) and Zoom Video Communications (ZM), remains compelling, even against the reopening backdrop.
“Roku is a very important name to us. Square, Zoom, Shopify, Teladoc — many of them are described as stay-at-home stocks,” Wood said. Some observers say, “‘We’re going back to work. Why are you paying attention to them?'”
Deeper-Sated Societal Changes
What makes names such as Roku, Shopify (SHOP), Square (SQ), and Teladoc potentially attractive on reopening-related pullbacks is that they operate in industries that were flourishing prior to the coronavirus pandemic.
So while the health crisis prompted the stay-at-home label on some these names, data confirm industries like e-commerce (Shopify), streaming entertainment (Roku), telemedicine (Teladoc), and fintech (Square) were already disruptors and growing in significant fashion prior to the pandemic. Those four stocks combine for roughly 17% of ARKW’s weight.
“What we believe is the coronavirus crisis changed the world dramatically and permanently, and when consumers and businesses find faster, cheaper, better, more productive, more creative -— they’re not going back to the old world,” said Wood in the CNBC interview.
The problem that some ARKW names are encountering this year is that some market participants are wantonly discarding stay-at-home stocks, assuming all are cut of the same cloth.
However, that could prove to be an error on multiple levels. For example, simply because the economy is opening again, that doesn’t mean folks are going to ditch streaming subscriptions, which is relevant to Roku. Similarly, telemedicine can boost efficiencies and lead to a higher level of personalized care. Why ditch it simply because pandemic concerns are easing?
The recent weakness in some ARKW holdings at the hands of economic reopening may be more reason to consider the ETF, not avoid it.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.