ETF Edge

Here are some ways to play the 'stay-at-home' theme using ETFs: Market analysts

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ETF issuers begin to embrace 'stay-at-home' theme — here are analysts' top picks

With millions working and learning from home, some exchange-traded fund issuers are trying to capitalize on the shift to virtual living.

Direxion kicked it off in April by announcing it would file for a work-from-home ETF, ticker WFH, tracking industries at the heart of remote connectivity such as cybersecurity, communications and cloud technologies.

Whether others will follow Direxion's lead remains to be seen, but there are already numerous options on the ETF market that investors can use to play the stay-at-home boom, market analysts say.

"It's amazing how we've been talking about FANG stocks for so long, but they worked right into the whole stay-at-home world – online shopping, home offices, video streaming, ... modern communication," Tom Lydon, the CEO of ETF Trends and ETF Database, told CNBC's "ETF Edge" on Monday.

All four FANG companies — Facebook, Amazon, Netflix and Alphabet — reported their first-quarter earnings results within the last two weeks. Shareholders responded well to all but Amazon, which said it would spend the entirety of its second-quarter profits on bolstering its coronavirus response. Netflix's spike in new subscribers was a particular highlight.

One of the most popular ways to trade these names using ETFs is via the Invesco QQQ Trust (QQQ), which tracks the tech-heavy Nasdaq 100 Index, Lydon said.

"The FANG stocks make up 35% of QQQ. If you add in Microsoft, it's 47%," he said. "So, it's a great way to play it as we continue to be quarantined in this stay-at-home world because it doesn't seem that their businesses are going to get weak any time soon. They just continue to pull away from the pack."

ETFs that have the biggest position in the FAANG stocks — which is FANG plus Apple — include the Communication Services Select Sector SPDR Fund (XLC) at more than 47%, the Vanguard Communication Services ETF (VOX) at over 44% and the Fidelity MSCI Communication Services Index ETF (FCOM), also at 44%.

Other existing products investors could consider include some of Global X's more focused products, Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA Research, said in the same "ETF Edge" interview.

He highlighted the Global X Cloud Computing ETF (CLOU) and the Global X Robotics & Artificial Intelligence ETF (BOTZ).

"Cloud computing [and] robotics ... [are] themes that I think have been driven home as people need more bandwidth to be able to work from home and as companies realize that they need more of an automation and use robotics when they can to improve the supply chain," Rosenbluth said.

"Some of these themes are really going to resonate with investors even more in 2020 than they have in the recent past," he said. "And there's a whole host of these products from First Trust, from ROBO, from other firms that are really in this space for investors that want to dig deeper into how you can play this stay-at-home theme."

Jason Bloom, director of global macro ETF strategy at Invesco, suggested Invesco probably won't be getting as granular as some others in the ETF industry anytime soon.

"We do try to be responsive, clearly, to changes in the structure of the market or fundamentals that would suggest that you have an investment theme that makes sense," he said in the same "ETF Edge" interview.

"We're probably a little more conservative in that durability of the theme for us is ... a very high priority," Bloom said. "So, if there's a risk that the theme may only have a year or two or so before it runs its course, it's probably not going to make it through our process, but if we think it has five, 10 years or more of durability then it certainly makes sense to us."

Disclosure: Invesco is the sponsor for CNBC's "ETF Edge."

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