On a Stellar Run, This Video Game ETF Isn't Playing Around

Beyond streaming entertainment and consumer goods, one of the premier industry-level beneficiaries of the coronavirus pandemic is video games and investors need not look any further than the VanEck Vectors Video Gaming and eSports ETF (NASDAQ: ESPO) for confirmation of that fact.

After hitting another all-time high Thursday, ESPO is higher by more than 9% over the past month and nearly 14% year-to-date. All that while the S&P 500 and Dow Jones Industrial Average are still lower on a year-to-date basis.

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.

“Video game engagement has broken records across a variety of metrics since the virus shutdown began,” said VanEck in a recent note. “Esports recently set a world record for live TV audience with the eNASCAR races that were held in place of regular, live races. However, some esports leagues and tournaments have been put on hold. For instance, the League of Legends Mid-Season Invitational was canceled due to travel restrictions put in place around the world.”

ESPO on the Rise

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.

“After taking into consideration all aspects of the video gaming and esports ecosystem, we believe the effects of COVID-19 have been a net positive for both video gaming and esports,” according to VanEck. “People around the world have been turning to video games to entertain themselves and each other online, and we view the spike in engagement as an acceleration of trends that have been in place for years.”

The explosive growth of esports could even power the space past traditional sports where revenue generation is now heavily tilted towards enhancing a fan’s multimedia experience. This is an important concept in China where many younger demographics that are chock full of devoted gamers are highly technologically savvy.

“We believe that the video game market is not a ‘zero-sum game,’” notes VanEck. “Consumers’ video gaming interests span a huge spectrum, and different types of games may appeal to a wide variety of consumers. New game releases have become widely followed by cultural events, especially on social media and streaming websites. Additionally, new types of games are being invented constantly.”

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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.