DIVERGENCE: Many ‘work-from-home’ (WFH) pandemic stock beneficiaries, from Zoom (ZM) to Twilio (TWLO), have cratered under the pressure of the post-pandemic return-to-work trend and higher bond yields. But WFH trends are stubbornly enduring, and workers keen to extend, even as they now face the test of rising unemployment and winter energy costs. This resilience may drive some opportunity after the WFH stock rout. And also keep pressure on the ‘losers’, from disrupted city centers to office landlords, with US office occupancy levels still under 50%.
DATA: A recent global study of WFH trends in 27 countries shows an average 1.5 working days at home. This ranges from a 2.6 days high in India to a 0.5 day low in Korea. There is a clear desire for more (see chart). Workers value the flexibility, lack of commute (which averages 64 minutes), and cost savings. Whilst employers are grudgingly warming to the idea, recognising the productivity surprise, worker satisfaction benefits, and less wage pressures. WFH flexibility is valued as equal to a 5% pay rise, and 26% would quit if forced back to the office full time.
IMPLICATIONS: These enduring WFH trends will continue to underpin secular shifts, such as away from bricks-and-mortar apparel, food-away-from-home and some transportation. Whilst they support e-commerce trends and related warehousing, logistics and payments. Our equal weighted 15-stock ‘WFH winners’ basket, that ranges from Home Depot (HD) to Digital Realty Trust (DLR), is down over 30% from its highs. Whilst its forward P/E valuation has nearly halved to 16x, despite the earnings outlook still holding firm. See @RemoteWork and @GigEconomy.
All data, figures & charts are valid as of 04/10/2022