The Direxion Work From Home ETF (WFH) is a prime example of a well-timed new ETF. WFH isn’t even a month old, but it already has more than $50 million in assets under management and is impressing when it comes to performance.
WFH tracks the Solactive Remote Work Index and invests in stocks of companies operating across work from home includes remote communications, cybersecurity, project and document management, and cloud technologies sectors. It invests in growth and value stocks of companies across diversified market capitalization.
Bottom line: WFH is seizing on the current trend of working from home, but the fund has the goods to be a credible long-term investment for investors seeking tactical exposure to the communication services and technology sectors.
“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.
WFH is a unique fund that offers exposure to companies across four technology pillars, allowing investors to gain exposure to those companies that stand to benefit from an increasingly flexible work environment. The four pillars include Cloud Technologies, Cybersecurity, Online Project and Document Management, and Remote Communications.
“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.
With companies like Apple and Twitter making work at home more commonplace, considering possible permanent options for employees who would elect that situation, the Work At Home Direxion ETF could stand to benefit from the changes. While some WFH components are richly valued, data suggest those names justify those lofty multiples.
“More importantly, many of those firms showed they have the ability to deliver on lofty expectations with robust earnings growth in the most recent reporting season,” according to Direxion. “While past performance doesn’t guarantee upcoming results will be as strong, the 40 stocks helping power the societal transformation toward more flexible work have considerably higher sales growth over the last 12 months. In addition, their forecasted earnings per share growth of 20% dwarf even that of the Nasdaq’s 13%, highlighting the vast potential that these stocks have today.”
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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.