It may be surprising to some investors, but guess what’s holding up well, relatively speaking, as the rest of the market struggles due to the coronavirus? Video games and eSports and ETFs.
Last week, the Global X Video Games & Esports ETF (NASDAQ: HERO) notched a loss that was only half as bad as the S&P 500’s, closed higher last Friday and is still in the green year-to-date.
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.
“Many malls and stores remain shut and sales of cars and smartphones are crumbling, but demand for health, entertainment and cosmetics products is buoyant, according to data from e-commerce giant Alibaba,” reports Reuters.
HERO 2020 Heroics
An important catalyst for HERO as 2020 unfolds is the strength of the consumer, particularly when new titles and hardware are expected later this year. A looming console upgrade cycle, expected later this year, could prove meaningful for HERO and its components as 2020 moves along.
“Both Microsoft and Sony are expected to release the new Xbox and PlayStation consoles this upcoming holiday season, representing the first major hardware upgrades since 2013,” said Global X in a note out last Friday. “The new consoles are expected to feature 8K TV support, ray tracing, and solid-state drive (SSD) storage – enhancements that will bring unprecedented realism to games and faster load times. Other details are still kept under a tight lid by the manufacturers.”
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.
“Historically, the release of a new console generates positive spillover effects for game developers. After all, what’s a cutting-edge console without a new game that can take advantage of those features?,” according to Global X. “New titles expected to be released include the latest iterations of established franchises like Battlefield 6 and The Sims 5, while others are expected, but still to be confirmed, like GTA 6 and Assassin’s Creed Ragnarok.”
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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.