Why Video Game ETF's Holdings Surprisingly Struggle in December

Home to an array of growth and momentum stocks, it is not surprising that the ETFMG Video Game Tech ETF (NYSEARCA: GAMR) was caught up in the recent bout of equity market volatility. GAMR, the first exchange traded fund dedicated to the video game investment thesis, entered Wednesday with a fourth-quarter loss of 15.50%.

Some data points suggest video game stocks can bounce back. Exciting industry trends include the shift to digital distribution of software, proliferation of HD and 4K displays, cloud content and streaming, virtual/augmented reality, motion tracking, episodic content, and diversified monetization models, are stimulating innovation and offer expanded opportunities for entertainment, education, simulation, and other game tech applications.

With the holiday shopping season here, GAMR would appear to be a logical choice for an ETF bound to do well in the fourth quarter. Investors may want to be cautious with that thesis because two of GAMR’s holdings have dubious December reputations.

GAMR follows the EEFund Video Game Tech Index, which tracks the performance of companies across the video gaming space. The ETF contains holdings from across the globe but with a focus on companies in the United States and in Asian countries.

December Gaming Issues

Take-Two Interactive Software, Inc. (NASDAQ:TTWO) and Activision Blizzard, Inc. (NASDAQ:ATVI), which combine for about 4.50% of GAMR’s roster, historically struggle in December.

“TTWO has racked up the second-worst average loss of 4.69%, and has ended the month higher less than half the time, per data from Schaeffer’s Senior Quantitative Analyst Rocky White. ATVI also has a win rate of 40%, with an average December loss of 3.12%,” according to Schaeffer’s Investment Research.