'Time to avoid WFH stocks': Jefferies strategist

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It may be “time to avoid” work-from-home stocks as the vaccine against COVID-19 becomes more widely accepted and the world rushes towards herd immunity, says Sean Darby, global equity strategist at Jefferies.

“As the vaccines get rolled out, it will be the speed of inoculation that will become critical for markets,” Darby wrote in a note to investors.

“If successful, the unloved parts of the equity market will be refranchised in 2021 while laggard bourses will enjoy ‘the first being last and the last being first.’ Time to avoid the WFH stocks,” wrote Darby.

The markets “should be able to discount a lower probability of lockdowns, social restrictions etc,” as immunization becomes more widely accepted.

“In turn this should mean that the unloved sectors (airlines, hospitality etc.) should be refranchised as solvency concerns abate,” he added, “It should also be good news for the banks.”

A Peloton exercise bike is seen after the ringing of the opening bell for the company's IPO at the Nasdaq Market site in New York City, New York, U.S., September 26, 2019. REUTERS/Shannon Stapleton
A Peloton exercise bike is seen after the ringing of the opening bell for the company's IPO at the Nasdaq Market site in New York City, New York, U.S., September 26, 2019. REUTERS/Shannon Stapleton

Work-from-home stocks outperformed in 2020 as the lockdowns prevented travel and entire economies were temporarily shut down.

The types of gains seen in these stocks last year are likely not to be seen in 2021.

Last year shares of Zoom (ZM) rose about 400%, Peloton (PTON) increased 430%, Etsy (ETSY) jumped about 300%, and Teledoc (TDOC) more than doubled. Many of these stocks were underperforming on Monday when the broader markets declined.

Positive vaccine news last quarter prompted some investors to begin moving out of the stay at home trades. When Pfizer (PFE) announced positive efficacy about its COVID-19 vaccine back in November, Peloton fell by as much as 25% in one session; Logitech (LOGI) fell 19%; Zoom Video dropped 17%; CrowdStrike (CRWD) fell 11%; Chewy (CHWY) fell 10%.

Ines covers the U.S. stock market. Follow her on Twitter at @ines_ferre

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