Covid-19 eSports Boost Confirms Case for This Thematic ETF

A prominent theme emerging in the wake of the coronavirus pandemic is the buoyancy of esports and video game investments benefiting from the stay at home trend. Just look at the Global X Video Games & Esports ETF (NASDAQ: HERO), which is up 14.31% year-to-date after hitting an all-time high last Friday.

HERO, which launched last October, “seeks to invest in companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality,” according to Global X.

Data bode well for the growth of the esports industry beyond the coronavirus situation.

“Esports is the fastest-growing theme in the gaming sector. These organized multiplayer video game competitions have enjoyed spectacular growth over the last decade, with thousands of fans filling stadiums to watch live events and millions following them on streaming platforms,” according to GlobalData. “Although esports currently caters to a niche audience – almost 10% of the global online population of around 4.5 billion – its reach is expanding rapidly.”

HEROic Implications

HERO’s underlying index features 38 stocks from nine countries. The bulk of the new ETF’s top 10 holdings are video game publishers, but the fund has exposure to hardware makers and semiconductor manufacturers, among other industries, as well. Speaking of hardware, HERO could benefit from a looming console upgrade cycle coming later this year.

“Brands from a wide range of industries are investing in esports to reach a young demographic that is typically resistant to traditional advertising channels,” said GlobalData analyst Rupantar Guha. “The increasing involvement of non-endemic brands such as Coca-Cola and BMW is helping to legitimize esports, as well as bringing in significant revenue.”

With American athletic leagues and competitions shutdown and citizens sheltering in place esports and video games are becoming prime avenues for gamblers and those seeking entertainment alike. Moreover, esports competitions are giving networks some form of sports to air.

Esports “has proved largely immune to the COVID-19 pandemic due to its prompt transition into online formats and sudden spike in interest from traditional sports organizations, which pushed esports further into the mainstream and brought it to the attention of a wider audience,” according to GlobalData.

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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.