The pandemic has forced people to do more at home – everything from work and school to exercising and watching new-release movies. The limitations on public engagement have led to more business for the companies that make it possible and easy to do more from home.
Still, COVID-19 simply accelerated trends that were already in place. People were doing more out of their homes before it became required. The lockdowns only reinforced how manageable and convenient it all is. Even if stir craziness has set in and people are longing for opportunities to be out and about again, the at-home lifestyle seems here to stay.
We think the companies that cater to in-home activities will continue to benefit from trends that should persist long after vaccines bring a return to a more normal environment. For investors, we think the opportunities to participate in these trends occur across five segments of the at-home market – home lifestyle, home entertainment, productivity, e-commerce and remote learning.
Home lifestyle companies bring public activities under your own roof.
Regular gym-goers may have initially missed the opportunities to work out alongside people who are similarly fitness-minded. But stationary bikes and treadmills offered by companies like Peloton make it possible to bring a coach and community of fellow exercisers into your home. Perhaps not surprisingly, Peloton saw its subscription base surge during the pandemic. With more people opening their minds to the benefits of these machines and having the financial means to purchase them, the company believes its addressable market could reach 95 million.1
Even when exercising at home, people want to wear high-quality workout clothing that is fashionable (perhaps because they’re engaging with a virtual community). This has benefitted firms like Lululemon, which is perhaps best known for its yoga wear but also offers a full range of athletic apparel. In a sign of synergy between the trends propelling the growth of home fitness, Lululemon announced last summer that it would acquire Mirror, the company whose digital home workout programs monitor your activity level and provide live feedback from a coach.2
The greater comfort people now have with doing more from home extends even to doctors’ visits. The growth in telehealth was another trend that started before the pandemic. From 2016 to 2020, Teladoc saw its patient visits rise by a compound annual growth rate of 80%, and its membership increased at a 40% CAGR.3 Public surveys demonstrate how comfortable people now are with getting medical care virtually. While only 11% had used telehealth in 2019, 76% percent now say they are interested in using telehealth going forward.4
Home entertainment is now considered an essential utility.
With severe restrictions on people’s ability to go to movies, plays, or concerts, streaming media became an essential utility, viewed as no less important than water, heat or electricity.
Subscriptions surged for the biggest player on the block – Netflix – as well as a new entrant on the streaming scene, Disney+. The substantial growth of these services is expected to continue even after the virus is under control. With 201 million global subscribers in 2020, Netflix could see its customer base catapult to 312 million by 2024. With its deep content library at its disposal, Disney unveiled its new streaming service at the end of 2019 and gained 87 million subscribers by the end of 2020. Bloomberg Intelligence projects it could have 245 global customers globally by 2024.5
Gaming has gone online in a big way, drawing both players and spectators. That has helped companies like Twitch. To date, the company has focused on live streaming video games, but it plans to expand to other types of streaming content like artwork creation and music.6
Robust technology makes working from home productive.
Before COVID-19, video-linked meetings in the office always seemed to be fraught with technical difficulties. It’s been a revelation for many to discover how easy conducting virtual meetings from home has been.
Technology, of course, is what makes working from home possible. Zoom is the first name that comes to mind when people think of online meetings. The company did benefit enormously from the shift away from office work, as its revenues in the third quarter of 2020 were 367% higher than they’d been for the same quarter of 2019. Its number of corporate customers – defined as those with 10 or more employees – posted a staggering one-year gain of 485%.7
A host of companies, including familiar names like Microsoft, supply the technology that enables working from home and virtual conferencing.
While many people, and especially those who’ve had to work with young children at home, may be eager to return to the office, many companies’ financial officers are taking a close look at the cost of having their workforce in high-rent office space. The pandemic also seems to have eliminated any perception that working from home is less productive. In a survey conducted by PwC last summer, 54% of chief financial officers at U.S. firms said they were open to making remote work a permanent option.
E-commerce in one year grew more than it did in the previous 10.
It’s perhaps not surprising that e-commerce spending exploded during the pandemic. In fact, it grew as much during 2020 as it did in the previous 10 years combined, according to the U.S. Department of Commerce.
Online shopping sites, like Amazon, are not the only companies benefitting from this growth. So too are firms that make online commerce possible. That includes delivery firms like FedEx and digital payment companies like PayPal, a well-known brand its own right, but the company also owns the now ubiquitous Venmo. In a September 2020 update to investors, PayPal projected that its revenue, which had been $375 million in 2019, could increase tenfold to $3.3 billion by 2023.
Even the U.S. government, which is not exactly known for adopting the latest technology trends, opted to use PayPal to distribute $1 billion in loans to small businesses through the Paycheck Protection Program that was part of the fiscal stimulus package passed by Congress in March 2020.
Remote learning will maintain a large share of the education landscape post-pandemic.
Pre-COVID-19, online learning was not uncommon for postsecondary education, but it was rare for K-12 schools. Now that elementary and high schools in almost every part of the United States have had to rely on remote education for some or part of their school year, it’s likely to become a permanent resource for all school levels. The need for it is global, as school closures affected 1.38 billion students worldwide.10
The shift to the virtual classroom has helped companies like Chegg, the digital learning platform that provides online tutoring, digital textbooks and other student services to make learning online easier. The company experienced a 63% year-over-year increase in its revenue for the third quarter of 2020.11
We think digital learning will remain an important component of education even when schoolrooms around the country and the world are full again.
Gain access to home-oriented companies in a diversified portfolio
Emles @Home ETF (LIV) provides investors with convenient access to high-quality companies that stand to benefit from this long-term shift to a more home-based lifestyle. It is managed by an experienced team with a track record of innovation.
As we increasingly work, shop, learn, and seek entertainment at home, investors now have an investment option that enables them to focus on the companies delivering these at-home services and creating the digital infrastructure that makes it all possible.
Full performance and holdings information can be found here.