This is coming to you from a home office and I suspect many of you are likewise reading this in a place other than a traditional workspace.
I’ve been doing it this way for nine years now, after office stints on both coasts and a couple of locations in between. I’d be lying if I said I didn’t miss the in-person happy hours and proverbial water-cooler conversations. But I have found that I can be — and am – more productive this way (honest, boss!).
Of course, it’s the internet that’s at the core of what makes it possible for me and millions of others to continue to be dedicated worker bees while achieving a more reasonable work/life balance.
And it’s the internet that has opened up a whole range of investment opportunities over the past couple of decades, including the one you’ll read about below.
— Bob Bogda, Editor
P.S. Like what you see? Don’t like what you see? Let me know.
It started with Twitter (TWTR). Soon thereafter, firms such as Facebook (FB) and Square (SQ) were joining the trend. And in coming weeks, expect to hear of yet more firms that have told employees that they never need to come back into the office. Beyond those that have adopted a permanent work-from-home policy, many more firms have said that working from home will remain in place at least until 2021, if not longer. And even then, many of those workers are likely to work from home either some or most of the workweek.
This trend has taken root as employers find that home-bound staff have been, for the most part, quite productive. Indeed, many jobs simply require us to be in front of a computer. Global Workplace Analytics says that 56% of all U.S. workers have jobs that are at least partially compatible with working remotely.
In this current unusual era, investors have been looking for an edge, trying to ride herd on these kinds of emerging trends. Trouble is, there is no magic “work from home” stock (except, perhaps, for chat and video service provider Zoom Video Communications (ZM), which, after a two-day drop of nearly $90 a share is still up an incredible 237% from March 12, when the lockdown began). Instead, there are stocks and funds that aim to can capture the theme. Perhaps the best known is the Direxion Work From Home ETF (WFH).
It’s notable that around 89% of this portfolio is invested in info tech stocks. That sector has been the clear beneficiary of the work-from-home trend, explaining why the Nasdaq Composite Index has surged more than 60% since March. That’s a good performance for a half-decade, not just six months.
Yet, I can’t comfortably recommend that ETF. At least not yet. It was launched in June and has attracted just $26 million in assets and has average daily trading volume of 79,000 shares. I mostly focus on funds that have at least $100 million in assets and trade at least 100,000 shares per day. That better ensures a fund will have long-term staying power. These days, fund sponsors are growing impatient with their support of smaller funds. Through late August, 188 exchange-traded funds and notes (ETFs and ETNs), had been closed in 2020. That’s the most on record, according to Factset Research.
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But even small ETFs bring another benefit. You can see what’s in them to explore your own ideas on a particular theme—like working from home. Among its top 10 holdings, you’ll find firms like Zoom, Twilio (TWLO), which enables workforce collaboration across locales, data-storage company Box (BOX) and Ping Identity Holding (PING), which helps ensure secure network access as we log on to corporate networks.
My favorite stock in this fund is Inseego Corp. (INSG), which is reasonably valued in the context of strong growth ahead. As shares have pulled back from their 52-week high of $15.25 in early August, they now hold clear value, trading at just three times projected 2021 sales.
Inseego sells gear that opens up business networks to Internet-of-Things (IoT) communications.
I am even more intrigued by the other half of Inseego’s business: providing 5G networks for home-bound workers (and those that are taking their work to a second home or a campground) through “hotspots.” Those are the little devices that people can use to bypass home networks and wi-fi. And optimized for 5G wireless speeds, they’re super-fast.
In the second quarter, Inseego saw a 44% spike in revenue as working from home really took root. And look for more strong growth as the company lines up new partners. On a recent call with investors, management said that Inseego will launch eight new products across six wireless carriers in the final months of 2020.
The timing for an aggressive slate of new product launches is just right. CEO Dan Mondor recently told investors that “the dramatic shift to remote work and distance learning has increased the demand for our products. To meet this sudden demand, we scaled up our production capacity and supply chain in a very short window of time.”
It’s interesting to note that consumers aren’t yet lining up in droves for these high-speed work-from-anywhere devices. Instead, employers are buying them on behalf of their employees. And it is not just about speed. “Organizations understand they have a distributed workforce and it increases their exposure to cyber threats,” added Mondor.
Investors are catching this company at the perfect inflection point. While annual sales had been stuck at around $200 million to $220 million in 2017, 2018 and 2019, they should approach $300 million this year and exceed $350 million next year, according to Lake Street Capital. Just as important, operating profits should nearly double, to around $14 million this year, and reach $48 million next year.
Action to Take: Consider buying shares of Inseego up to $14 and sell when they reach $20.
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