When the stocks initially started faltering due to the COVID-19 outbreak, there was some talk that video game equities and ETFs such as the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSEArca: NERD), could benefit as more folks all over the world were forced to stay inside.
That hasn’t been the case as no corner of the market has proven safe, but there’s no denying that more cities and countries are limiting travel, more people are being forced to stay at home and more folks are turning to video games as a form of entertainment.
NERD seeks to track the total return performance of the Roundhill BITKRAFT Esports Index, which tracks the performance of the common stock of exchange-listed companies across the globe that earn revenue from electronic sports, or esports related business activities. Data continue confirming the robust growth expectations associated with esports.
“As governments begin to encourage social distancing to slow the spread of novel coronavirus, the videogame industry could see some near-term benefits,” reports Connor Smith for Barron’s. “Plus, such stocks double as recession-resistant, if the virus were to spark an economic downturn, according to Cowen analyst Doug Creutz.”
Solid Idea in These Times
It’s no secret anymore that gaming, or esports, is big business and that trend should continue in 2020. That said, investors should keep gaming-focused ETFs on their watch lists for the new year. Importantly, video game equities have a reputation for performing well after the past instances of virus situations comparable to COVID-19.
NERD’s underlying index consists of a modified equal-weighted portfolio of globally-listed companies who are actively involved in the competitive video gaming industry. This classification includes, but is not limited to video game publishers, streaming network operators, video game tournament and league operators/owners, competitive team owners, and hardware developers.
“We believe that the video game sector rather uniquely is poised to see very little disruption to results over the next 12 months in all but the most severe (read: the stock market will be the least of our problems) scenarios. As such, we view the sector as a logical place to favor in the current volatile market environment,” said Creutz by way of Barron’s.
Due to gamers’ ability to download titles and not need to go into a physical store to purchase games, the industry may not experience the coronavirus earnings hit others will.
“If the coronavirus outbreak does lead to a recession, Creutz thinks earnings estimates would see only modest pressure. For now, he is maintaining his earnings estimates for the companies he covers,” according to Barron’s.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.