New research is backing up the idea that working from home will be a trend that is here to stay, which means its time for investors to look at which stocks could benefit and which will be hurt.
Around three-quarters of UK firms (74%) plan to maintain the increase in home working after the coronavirus pandemic has abated, according to a survey by the Institute of Directors (IoD).
More than half of those polled (54%) they intended to reduce their long-term use of workplaces, the poll of almost 1,000 firms last month found, with almost half (47%) planning to increase flexibility around working from home (WFH) in the long term.
As noted a month ago, when Boris Johnson was trying to get everyone back to the office, one of the obvious consequences of people staying home for work has been the rise in cloud computing, which has provided an extra boost to many existing US tech giants like Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) and catapulted the likes of to Zoom Video Communications (NASDAQ:ZM) to not just a household name but its own verb on a par with Google.
There are numerous other WFH tech providers on both sides of the Atlantic, including US names Citrix Systems (NASDAQ:CTXS), cloud communications platforms Slack (NYSE:WORK) and Twilio (NYSE:TWLO), e-signature company DocuSign's (NASDAQ:DOCU), user authentication specialist Okta (NASDAQ:OKTA) and e-commerce and augmented reality expert NexTech AR Solutions (CSE:NTAR) (OTCMKTS:NEXCF).
In the UK a longer-lasting second wave of tech spending is expected to benefit the likes of software licensing group Softcat (LON:SCT), broadband and data connections provider Gamma Communications (LON:GAMA), IT group Computacenter (LON:CCC) and cybersecurity group Avast (LON:AVST).
Smaller caps that might benefit include conference call and remote working services specialist LoopUp Group PLC (LON:LOOP), information assurance provider NCC (LON:NCC), data security group Blancco Technology (LON:BLTG), cloud IT specialist iomart (LON:IOM), Crossword Cybersecurity PLC (LON:CCS), training and careers focused pair Dev Clever Holdings (LON:DEV) and VR Education Holdings PLC (LON:VRE).
Others have been quickly adapting to the new realities, with enterprise software group Sopheon (LON:SPE) integrating its latest software release with Microsoft Teams, cloud-based editing technology specialist Blackbird (LON:BIRD) teaming up with larger partners such as Tata Communications,
WFH fund focus
For investors who prefer the wider sweep of a fund or ETF, there are various options. One focused on cloud computing is the HAN-GINS Cloud Technology UCITS ETF (LON:SKYY), with another of HanETF’s stable focused on various tech megatrends: the HAN-GINS Tech Megatrend Equal Weight UCITS ETF (LON:ITEK).
There is even a WFH ETF, the Direxion Work From Home ETF (NYSEARCA:WFH), which tracks the Solactive Remote Work Index, a 40 stock index of work from home-friendly product and service providers, including remote communications, cybersecurity, document management and cloud technologies. It’s up more than 8% since an impressively quick launch in June.
A tracker fund with a wider focus is SPDR MSCI World Technology (LON:WTEC), while there are managed technology funds offering a strong tilt towards the WFH theme, including Polar Capital Global Technology Trust (LON:PCT), where top 10 holdings include Microsoft, Adobe and Apple; or there is the Allianz Technology Trust (LON:ATT), where the top investments include Zoom, cybersecurity company Crowdstrike (NASDAQ:CRWD) and cloud security company Zscaler.
Entertaining from home
On a similar angle, with cinemas shutting down and pubs shutting early, analysts Ken Rumph and Lyra Li at Jefferies put out a note on Monday saying "staying in is the new going out".
"The white space above the depressed activity lines in those charts of eating out and holiday travel, let alone flat-lining live music, theatre, etc, is spending that, even in a recession, can flow to in-home entertainment."
This means more spending on beer, food delivery, TV and video games.
What's more, top-of-the-range Xbox and Playstation computer consoles are at their lowest inflation-adjusted prices in two decades, the Rumph and Li noted, with cheaper digital-only versions at even more affordable price points, plus subscription/contract payment options.
While a one-off sales bounce would not justify price gains averaging more than 40% in the year to date, two long-term benefits are clear, the analysts added: the margin-boosting shift to digital and "the tendency of modern games-as-a-service video game business models to retain and monetise players means that new and returning gamers during lockdowns".
Surveys of 5,500 consumers around the world in March and August showed an initial unsurprising 24% surge in playing during the March peak lockdown followed by a strikingly higher balance of 26% still in August, even though economies had reopened.
That winter is coming is also good news: "The factors above are set to combine over the holiday and 1Q21 winter period: dark nights, COVID howling outside the door (or in the White House rose garden). A vaccine (in 2021) could even exacerbate the leisure spend shift, easing recession fears but deferring travel and out of home spend to the benefit of in-home spending now."
Codemasters (LON:CDM) and France's Ubisoft Entertainment are the top picks in the video games space, with Frontier Developments (LON:FDEV) also rated 'buy' and set to soon launch its popular family game Planet Coaster on consoles, and 'hold'-rated Team17 (LON:TM17) also potentially enjoying the happy holidays, too.
Other gaming stocks not mentioned by the analysts that have been enjoying demand this year include Bidstack (LON:BIDS), which services computer game developer company; Keywords Studios (LON:KWS), the provider of services to video games developers; and mobile gaming developer Gaming Realms (LON:GMR).