New Work From Home ETF Gains 32% in 2020

Zoom and CrowdStrike led the rise, but can this unique new player continue its run?

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Jan 06, 2021
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In light of the Covid-19 pandemic driving the remote work trend faster, the Direxion Work from Home ETF (WFH, Financial) was launched in June of 2020 with the intention of providing a targeted ETF that could offer investors a portfolio of stocks likely to benefit.

The past year was an interesting year for investors. The first half of the year saw sharp declines due to the economic recession. The second half of the year brought about some new opportunities to gain in the stock market due to price rebounds on optimism for the future and the realization that some companies were benefitting from the pandemic. For the year, the S&P 500 finished with a gain of 16.26% and the Nasdaq had a gain of 43.6%.

Direxion took quick action to develop an ETF with a list of stocks that could benefit from an increased percentage of the population working from home. The ETF is a passive fund that seeks to replicate the holdings and performance of the Solactive Remote Work Index.

Some basic attributes of the WFH ETF include:

  • End of year price $67.52
  • 52 Week Range $49.20 - $69.44
  • Net assets $152.31 million
  • 40 holdings
  • U.S. listed securities and American Depository Receipts (ADRs)
  • 89% of holdings from the U.S.
  • A gross and net expense ratio of 0.45%
  • Four targeted industry groups: cloud technologies, cybersecurity, online project and document management and remote communications
  • Artificial intelligence selection based on keywords programmed to discover through the ARTIS system

Since the Fund was only launched in June 2020, it has fragmented performance for the year. In December it returned 10.74%. In the fourth quarter it returned 24.26%. From its inception to year end, it had a return of approximately 32% versus the S&P 500's 19.4%. Below, we'll take a look at the WFH ETF's top two stock performers in 2020.

Zoom

Zoom Video Communications (ZM, Financial) provides a popular video conferencing technology service. The stock gained 395.77% in 2020. In the fourth quarter the stock was down -28%. In December the stock had a return of -29.5%.

The stock trades at around $360 as of the writing of this article. In the trailing 12- months, the company has revenue of $1.96 billion. The one-year revenue growth is 88%, while the gross margin is currently around 70%. Net income for the trailing 12-months is $1.1 billion with a net margin of 22%. The company's operating margin was 21% with a 12-month operating income of $414 million. Trailing 12-month earnings per share came in at $1.44 with a one-year earnings per share growth rate of 200%.

Some of the year's news highlights included:

  • Plans for a corporate email service
  • Growing global presence for data and research
  • Increased security
  • Online events
  • Plans for messaging service
  • Department of Justice investigation

CrowdStrike

CrowdStrike (CRWD, Financial) is a cybersecurity/security focused technology company. It debuted its initial public offering in June 2019, gaining 87%. The company offers several technology security solutions.

The stock has been trading at around $209 as of the writing of this article. Trailing 12-month revenue for the company is $762 million with one-year revenue growth of 93%. As a technology service business, the company also has a high 12-month gross margin at 73%. In the past 12 months the company has not posted strong bottom line results, though it has been beating analysts' expectations. The 12-month loss per share was 41 cents, while the 12-month operating loss was $108 million.

The year's news highlights for CrowdStrike included:

  • Increased demand for security offerings from both domestic and international threats
  • Partnership with SolarWinds after high profile attack
  • Partnership with Microsoft Azure
  • Increased credibility as security solutions provider
  • Top competitors: McAfee, Norton, Cisco Security

Conclusion

In my opinion, the WFH ETF is one strong beneficiary of 2020, and I expect it to continue to do well in the future, as the work from home trend is not a temporary thing created by the pandemic - the situation in 2020 only accelerated things for these companies.

Disclosure: I own shares of WFH Work From Home ETF

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