Banking

Popular Pandemic Stocks Lose Even More Zoom

Looks like pandemic stock plays and related ETFs could use a booster shot. They’re suffering mightily this year as investors shift more aggressively toward the economy’s reopening.




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Shares of pandemic darlings Zoom Video Communications (ZM) and at-home exercise company Peloton Interactive (PTON) are headed in reverse — and fast. And they’re making way for stocks and ETFs exposed to people gathering together again.

Pandemic Stock, Zoom Pain

Zoom Video, arguably the most visible winner from the stay-at-home pandemic trend, has seen its shares lose more than a third of their value this year. Meanwhile, Peloton Interactive’s shares have plunged more than 70% in 2021 so far.

Not many large ETFs own both stocks, says Todd Rosenbluth, head of mutual fund and ETF research at CFRA. But the ARK Next Generation Internet ETF (ARKW), a rare large ETF that does hold both, is paying for it. The $5-billion-in-assets fund is down more than 4% this year. That’s painful in a year the S&P 500 is up 25%.

The pandemic play, it seems, is simply passe for now.

Strong payroll numbers plus new therapeutics for dealing with Covid “ease some of the supply-chain problems, and that will make some investors embrace the reopening trade,” said Edward Moya, senior market analyst at Oanda.

Pandemic Stock Selling Spreads To ETFs

ETFs that rushed to capitalize on the remote-work trend are getting sent home, too. Missing out on this year’s 20%-plus rally in the S&P 500 is hard to take.

The Emles @Home ETF (LIV) is a small $3.8 million fund. It also happened to be the stay-at-home ETF with the largest allocation to Peloton at 5.3% through last month, says ETF.com. It’s a diversified ETF on the theme with 30 holdings. And its top position is now runaway winner Nvidia (NVDA). But despite owning the highflying graphics-chip maker, which more than doubled in value this year, Emles @Home is up just 8%.

Only smaller funds like Global X Health & Wellness (BFIT) and Roundhill Streaming Services & Technology (SUBZ) have owned both Peloton and Zoom Video, Rosenbluth says.

The sell-off of work-from-home stocks has been rougher on the $5.2 million iShares Virtual Work and Life Multisector ETF (IWFH). It’s down more than 18% this year, as even positions in top technology stocks like Microsoft (MSFT) can’t overcome losses in plays like Zoom Video.

Streaming Isn’t Saving Pandemic Stocks Either

Zoom Video’s inclusion in many streaming video or cloud computing ETFs isn’t helping investors beat the S&P 500. Roku (ROKU), a favorite provider of streaming entertainment at home, has seen its shares drop by roughly a third this year.

Similarly, Rosenbluth points out that Zoom Video is held in many large, more diversified ETFs tied to companies powering remote technology. He names among them Global X Cloud Computing (CLOU), First Trust Dow Jones Internet (FND), iShares Expanded Tech-Software Sector (IGV) and Invesco Nasdaq Internet (PNQI).

And yet, none of these is topping the S&P 500 this year. Global X Cloud Computing is up just 2.5%.

If Pandemic Stocks Are Out, What’s In?

In many ways, much of the money flowing out of pandemic plays found its way to reopening trades already. Theater chain AMC Entertainment (AMC) is up more than 1,700% this year as investors follow the money from at-home exercise bikes to theaters.

AMC is a top holding in the SoFi Social 50 ETF (SFYF), which reflects popular holdings of individual investors. And that ETF is up nearly 50%, roughly double the S&P 500’s gain this year. Another big winner in the post-pandemic world is Avis Budget Group (CAR), up 725% this year.

And that’s a big theme for the year. Less Zoom, more vroom, says Rosenbluth. “If the world is truly opening up, then (travel-related ETFs) should be a beneficiary, as should leisure and entertainment,” he said.

Panic At The Pandemic

Shares of pandemic-related and work-from-home stocks and ETFs are mostly lagging this year

Company / Fund Symbol Price YTD % ch.
Peloton Interactive (PTON) -71.7%
Zoom Video Communications (ZM) -38.7%
Roku (ROKU) -31.9%
iShares Virtual Work and Life Multisector (IWFH) -18.8%
ARK Next Generation Internet (ARKW) -4.1%
Invesco NASDAQ Internet (PNQI) 1.9%
Global X Cloud Computing (CLOU) 2.5%
Emles @Home (LIV) 8.2%
Direxion Work From Home (WFH) 10.7%
First Trust Dow Jones Internet Index (FDN) 10.7%
Global X Health & Wellness (BFIT) 14.9%
iShares Expanded Tech-Software Sector ETF (IGV) 18.7%
SPDR S&P 500 ETF Trust (SPY) 25.2%

Follow Matt Krantz on Twitter @mattkrantz



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