Who would have ever imagined that offices would be a thing of the past? Okay, that might be a little dramatic, but working from home has never been more accepted than it is now. The COVID-19 pandemic may have changed the way we do business forever. It took away the ability to be in close contact with our co-workers and clients. It forced many of us to do our jobs from home for the first time. What work from home stocks should you look at?
Is Working From Home the New Normal?
As Microsoft CEO Satya Nadella said when the pandemic first started, “We’ve seen two years of digital transformation in two months.” People set up in their bedrooms, dining room tables, even on the couch. Offices were vacant.
Then a funny thing started to happen. Nobody really noticed a difference. It might be a stretch to say that efficiency and production went up.
But there certainly wasn’t as steep a dropoff as many expected. Employee morale went up, people willingly worked harder and longer hours because they knew there was no long commute waiting at the end of the day.
The transition was so seamless that a number of big tech companies have moved to permanent remote work. Jack Dorsey seems to be a big supporter of working from home as both Twitter and Square have switched to it permanently.
Several other companies have instituted a remote-first plan where it’ll be assumed employees will work remotely unless they say otherwise.
These companies include Coinbase, Shopify, UpWork, Quora, Basecamp, Okta, Pinterest, Dropbox, Instacart, and Snowflake. You’ll notice that many of these are computer-based and so technically can be done from anywhere!
What are the long-term ramifications of remote work? That remains to be seen. Companies can save on renting office space. But does a lack of in-person work have a negative effect on creativity or the ability to solve problems? We don’t know but these work from home stocks are good ones to keep on your watch list.
Investing in WFH Stocks
It’s hard to quantify how much direct interaction and communication matter in a work environment. We may look back on this era in a decade and laugh that we actually thought people could work from home. Or, this could easily be the new normal.
If one company offers remote work and a competing rival doesn’t, we can probably assume which would get more applicants. Whichever side of the argument you land on, working from home is definitely here to stay in one form or another.
I always talk about our investing radars and being on the lookout for upcoming trends. If you believe in the work from home movement, then why not look at some companies that are helping to make it possible? Many of these stocks ran higher during the peak of the pandemic, and have now pulled back.
Look, I want the pandemic to be over as much as anyone. I also believe that a fairly large segment of the economy will be working remotely forever. It allows companies to broaden their hiring parameters to basically anywhere in the world. The pros outweigh the cons in my mind, so let’s take a look at some stocks that should be on our radar. In fact, look for patterns like the K shaped recovery.
Microsoft (NASDAQ: MSFT)
Any discussion of office or enterprise work begins and ends with Microsoft. Hence why they’re on our work from home stocks list. An estimated 80% of office computers around the world use Microsoft’s Windows operating system. This is as close to a dichotomy as you can really get between Windows and Mac iOS so there should be no surprise that they are two of the largest companies in the world by market cap.
During the pandemic, Microsoft unleashed its video chat Skype replacement, Microsoft Teams. Not surprisingly, the app caught fire as it was included in the Office bundle for businesses with Windows computers. In July, Microsoft revealed that Teams now has 250 million monthly active users. Microsoft is an enterprise juggernaut, so there should be no surprise that it tops the list of work from home stocks to invest in.
Which Companies Will Benefit From Work From Home?
Zoom Communications (NASDAQ: ZM): When we talk about winning companies during the pandemic, Zoom is one of the first that comes to mind. While Microsoft Teams may have the user base, Zoom became the de facto verb for video calling. But a lot of the stock’s gains came early on in the pandemic when video calling was still new.
Check the stock chart and you will find that Zoom shares are down 5% year to date and are only up 4.8% over the past 52-weeks. This is one of the stocks I talked about earlier which has pulled back since the ‘great reopening’ was teased.
I believe that financially savvy companies will replace much of their business travel with video calls.
Different industries are utilizing Zoom as well like telehealth, courtroom hearings, and even education. When your brand becomes the verb for something, it usually turns out well. Just ask Google, Kleenex, and Xerox.
CrowdStrike (NASDAQ: CRWD): Hey, with everyone signing into VPNs and work servers from their home computers, companies need to invest in security. CrowdStrike is emerging as the industry leader in endpoint cybersecurity. The company has a portfolio full of high-profile partners. Recently, CrowdStrike formed a partnership with Google to extend its endpoint security to all cloud services.
CrowdStrike’s Falcon platform is a leader in endpoint and cloud security. It creates a vast network of all of its clients and uses artificial intelligence to transfer data from any breach to the rest of the network. CrowdStrike is only a $63 billion company so it has room to run, especially with estimates of the cybersecurity industry being worth nearly $350 billion by 2026. So consider these work from home stocks.
More Companies to Consider
DocuSign (NASDAQ: DOCU): I could have chosen Adobe (NASDAQ: ADBE) here, but I think DocuSign encompasses the remote environment better. DocuSign is one of the premier platforms for obtaining true, verified digital signatures.
It has only been on the market since 2018, but since then the stock has been a monster for early investors. DocuSign has returned over 650% to shareholders since its IPO and is taking on the likes of Adobe head-on.
The company has a lucrative recurring revenue system with its software subscriptions. DocuSign is not yet a profitable company by GAAP measurements, but when it does reach that point, this company and stock will be a monster in the making.
Fiverr (NASDAQ: FVRR): Another industry that picked up in popularity during the pandemic? The gig economy! People who worked from home were able to pick up side gigs in the time that they saved from commuting to and from work.
Fiverr and UpWork (NASDAQ: UPWK) were big winners at the start of the pandemic. The freelance company came out of nowhere and soared to an all-time high price of $336.00 per share, only to fall by more than 50% to its current levels.
As the world reopens, the general opinion is that freelancers will head back into the office. The freelance economy is estimated to be worth upwards of $1.4 trillion today. That’s right, trillion with a ‘T’. The gig economy is going nowhere, and people are quickly seeking financial and career independence in a completely new way of working from home.
Direxion Work From Home ETF (NYSE: WFH): Some of you just aren’t into buying individual stocks and prefer to passively invest in ETFs. Totally fine! In fact, I would say this is the best way for most people to invest. I did find it funny that there is an ETF dedicated to work from home stocks.
A quick look at the holdings is a bit of a head-scratcher though. The fourth highest holding is Facebook, and the tenth highest is Alphabet. I mean I kind of understand Google being there, but Facebook? Anyways, the fund has surprisingly returned nearly 40% over the past year so it’s outpaced the S&P 500. Still, I think if you put in the research you can make a basket of work from home stocks that will better perform this ETF.
Work From Home Stocks Bottom Line
You’ve probably realized now that most of these work from home stocks are tech or software-based companies. Truth be told we wouldn’t be able to work from home if technology was not as advanced as it is. Video calling, cloud computing, cybersecurity, digital certification, all of these are a part of the future of how we work.
Personally, I think a lot more companies are going to at least provide their employees with the option of work from home. Does it make sense to make everyone come into the office only to hop onto video calls? It has now been nearly two years and on the whole, it’s hard to argue that productivity has declined.
Publicly traded companies are still reporting record-breaking quarters. Perhaps this is all more an indictment of how much time we used to waste when we went into the office. The stocks we discussed are great investments in general, but I believe each of them can benefit from the long-term tailwinds of the work from home economy.