Social distancing and being shut in are becoming very real phenomenons around the world and with so many people desperate for entertainment and stimulation, the case is growing strong for a second-half if not second-quarter recovery in video game ETFs such as the Global X Video Games & Esports ETF (NASDAQ: HERO).
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.
One catalyst for gaming equities has been a variety of data points confirming that Chinese gamers are buying more video games as they are forced to stay inside due to the COVID-19 outbreak. However, there’s more to the story for HERO and rival funds this year. Data confirm gamers are getting their game on as the coronavirus shuts off other avenues of entertainment.
“The latest week-over-week numbers during peak hour usage showed many people are turning to gaming as a way to pass the time, with the technology leader seeing a 75% increase over its networks,” according to Verizon. “Video streaming increased by more than 12% and overall web traffic by just under 20%.”
Heroic Opportunity
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.
Verizon data confirm that gaming data usage jumped 75% last week, more than double the increased usage rate of VPN.
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.
In real-time, HERO is proving to be a somewhat admirable/less bad equity play in the coronavirus environment. Yes, the video game ETF is down more than 14% this month, but that’s significantly less worse than the 25% shed by the S&P 500.
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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.