There’s some merit to the coronavirus quarantine investment theme, at least when it comes to select streaming entertainment and video game stocks. Just look at the VanEck Vectors Video Gaming and eSports ETF (NASDAQ: ESPO).
ESPO seeks to track the performance of the MVIS Global Video Gaming and eSports Index (MVESPO). The index is a rules-based, modified capitalization-weighted, float-adjusted index intended to give investors a means of tracking the overall performance of companies involved in video gaming and eSports.
Month-to-date and year-to-date ESPO is performing significantly less poorly than broader equity benchmarks confirming that there may just be something to video game stocks being winners as shelter-in-place policies take hold around the world due to the COVID-19 pandemic.
“Video game and esports stocks are uniquely positioned to weather this economic recession in which the vast majority of the population is forced to stay inside for extended periods of time,” said VanEck product manager John Patrick Lee in a recent note. “Across the spectrum of the industry, including live-streaming, esports competition and concurrent users playing, analysts have noted a significant increase in the number of people logging on to play video games. What are people going to do if they are stuck at home for an extended period of time on a mandatory lockdown? Play video games—with themselves and each other.”
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.
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.
“Video games and esports have witnessed a sharp increase in engagement around the world since the virus broke out,” said Lee. “We view this phenomenon as an acceleration of trends that were already in place, as opposed to a short-term fad that will reverse once the virus fears subside.”
Beyond the coronavirus, there remain compelling reasons to consider ESPO as a long-term growth investment.
“Underpinning these seismic shifts in how people play, consume and interact with others, lies the natural aging of the population,” said Lee. “Younger consumers (30 and below) have grown up online and on their parent’s phones and iPads. According to the Entertainment Software Association, 65% of American adults play video games. As Millennials have grown into adults, they have continued to spend time and money on playing video games.”
For more on tactical strategies, please visit our Tactical Investing Channel.
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.