Not many corners of the market have been immune to coronavirus punishment, but with so many people in China and other parts of the world staying home, some video game strategies are holding up nicely.
For example, the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSEArca: NERD) is only slightly lower on a year-to-date basis while the S&P 500 is down 2.80%.
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.
“Active users of mobile games developed by Tencent Holdings Ltd. and NetEase Inc. have surged in China as quarantines keep people at home, underscoring the relative outperformance of their shares amid the coronavirus-driven market tumult,” reports Bloomberg.
Tencent and NetEase combine for about 8.60% of NERD’s index weight, according to Roundhill data.
Post-Virus Play
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 past instance of virus situations comparable to COVID-19.
“In the 6-month and 12-month periods following previous epidemics, the S&P 500 has averaged price returns of +10.3% and +15.6%, respectively,” according to Roundhill. “During these periods, video game stocks have outperformed.”
While the coronavirus isn’t yet contained, some investors may be inclined to evaluate ideas that have histories of performing well after similar outbreaks. Enter video game equities.
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
Related: Use This NERD ETF For eSports Access
“On average, a “AAA Games Basket” — an equally-weighted basket of Activision Blizzard, EA, Take Two, and Ubisoft — returned +21.9% and +39.7%, respectively, in the 6-month and 12-month periods following previous outbreaks,” notes Roundhill. “This may be a result of individuals spending more time indoors, engaging with various entertainment mediums.”
That quartet of gaming equities combines for approximately 19% of NERD’s weight, indicating that if history repeats, NERD could be a winner following containment of the coronavirus.
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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.