ETF Trends CEO Tom Lydon discussed the Direxion Work From Home ETF (WFH) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
The Direxion Work From Home ETF 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. Companies are selected for inclusion in the index by ARTIS, a proprietary natural language processing algorithm, which uses keywords to evaluate large volumes of publicly available information, such as annual reports, business descriptions, and financial news.
WFH is a new ETF idea that capitalizes on the shift in the traditional work environment as we know it. Due to the pandemic, we are witnessing the greatest acceleration in the shift to remote work than we’ve ever seen before.
Coronavirus and How We Are Redefining the Workplace
The rise of broad access to the internet laid the cornerstone for widespread remote working environments. With the COVID crisis forcing millions of employees to work from home, this trend ought to accelerate even further. The situation benefits companies offering key technological infrastructure and services that help enable working remotely.
Price Waterhouse Cooper’s recent COVID-19 CFO Pulse Survey notes that more than half (54%) of companies say that going forward, they’re planning to make remote work a permanent option for roles that allow. It’s even higher (61%) among financial services firms. 42% of recent respondents nationwide say they are working from home – a massive jump from only 9% who say they worked entirely from home before the pandemic.
Because technology has allowed for higher remote productivity, trends toward more flexible work locations have increased over recent decades. Society has embraced the fact that a work-life balance does not require certain job functions to be executed in a traditional office setting.
In 2017, about 43% of employed Americans had spent at least some time working remotely. In 2018, about 5.2% of US workers – or over 8 million people – worked entirely from home. 75% of Fortune 500 CEOs say they plan to accelerate the technological transformation of their company.
As mentioned, “Work from Home” encompasses four emerging themes:
- Cloud Technologies: Due to the need for data to be securely stored, accessed, and shared remotely, companies offering cloud technology services and on-demand availability to computer systems may benefit.
- Cybersecurity: More flexible workspaces open the potential for increased cyber threats that likely increases the demand for companies offering cybersecurity systems.
- Online Project and Document Management: Remote work requires applications that enable the management of projects and collaboration across individuals and teams, boosting the need for tools that enable this to occur efficiently and securely.
- Remote Communications: With workers in sporadic locations, the need for videoconferencing, instant messaging and email applications will increase, so that coworkers can be connected even when not together physically.
Related: ETF of the Week: ARK Genomic Revolution Multi-Sector Fund (ARKG)
WHF tracks the Solactive Remote Work Index, which is comprised of 40 equally-weighted U.S. listed securities and American Depository Receipts that have significant exposure to remote communications, cybersecurity, project and document management, and cloud technologies. With smart beta indexing methodology, Solactive utilizes its proprietary natural language processing software ARTIS.
The Algorithmic Theme Identification System identifies the thematic exposure of a broad set of companies by analyzing more than 500,000 text documents related to them and determining a company’s degree of thematic relevance based on theme-related keywords given to the algorithm as an input. Solactive picked the top-10 companies by thematic relevance of each one of the four technological fields – after applying liquidity filters.
The 40 components of the Solactive Remote Work Index are equally weighted. Relative to the Nasdaq-100, WFH’s index has a lower-weighted average market cap, with stronger earnings growth potential and a lower P/E, highlighting that the 40 stocks in WFH may offer an attractive combination of growth and valuation relative to the tech-dominated Nasdaq-100.
Listen to the full podcast episode on WFH ETF:
For more podcast episodes featuring Tom Lydon, visit our podcasts category.