Opinion: these 4 stocks and 3 ETFs let you capitalize on the boom in video games and esports


Like millions of other people, I have maintained my sanity during the COVID-19 pandemic through video games. To an older generation, that may sound strange, but the reality is that gaming is very common in the 21st century, and also big business. Research firm NPD has shown that three out of four Americans, or roughly 244 million, we play video games for an average of 14 hours per week. And thanks to the lack of out-of-home entertainment options in 2020, game sales worldwide jumped 20% to a staggering $ 180 billion.

In fact, the games are so popular and lucrative that professional esports now have an audience of approximately 500 million people worldwide, with a 70% increase in the number of viewers in the US last year. due to the pandemic and the lack of traditional spectator sports options. . And as with many other tech trends, these recent converts are likely to stick around and continue to drive the esports business. Here’s one way to put it in context: E-sports is expected to have nearly 800 million viewers by 2024, nearly 825 million professional basketball fans worldwide today. Some of the biggest publicly traded video game stocks are old news by now. Over the past 10 years, Activision Blizzard ATVI gaming powerhouse, -1.73% has risen about 800% compared to roughly 200% for the S&P 500 SPX Index, -1.03% in the same period, growing to nearly $ 80 billion in market value. And of course, there has been the GameStock GME frenzy, -3.91% leading to a Congressional hearing. But there are a host of startups looking to level up amid continued industry growth. If you’re looking to play games and esports craze, here are some options worth checking out: Nintendo Nintendo 7974, -0.40% NTDOY, -4.84% is an icon of the video game industry. But just five years ago there was talk of “Nintendo’s sad struggle for survival” amid declining popularity and weakening finances. Mario’s house is back in a big way, thanks to his groundbreaking Switch console that successfully united the console and mobile gaming markets. Nintendo’s eShop is now packed with “casual” games like the smash hit “Among Us,” which was originally created for mobile phones and had 500 million players in November. While there are big margins on $ 70 games or high-end hardware, Nintendo has built both its user base and its software offerings around low-cost diversions that together add up to significant revenue. At the same time, a strange convergence of circumstances has created great tailwinds for Nintendo’s high-end titles. Since its previous console, the Wii U, was a flop, Nintendo was able to reissue many native games at great prices during the early Switch years. Now, the company has planned launches in its Zelda and Metroid franchises alongside a possible upgrade to the Switch itself to boost high-margin hardware sales. Thanks to these events and a huge pandemic momentum, Nintendo shares have doubled from their initial 2019 levels and are now trading at their highest levels since 2007. And if the 2021 launch schedule lives up to expectations , we could see new all-time highs. as this Japanese gaming powerhouse continues its return to dominance in the industry. Corsair If Nintendo has charged by connecting with more casual gamers, then Corsair Gaming CRSR, -7.66% shows how to cater to the most serious PC gamers. This roughly $ 4 billion company is a leading provider of gaming-related parts, from CPUs to peripherals like headsets and keyboards and specialty components for streaming games on the Internet. The streaming business line is particularly interesting, both through competitive esports gaming and commercial gamers looking to win over viewers on platforms like Twitch and YouTube. The company completed its initial public offering in September and is very profitable. It is also growing impressively, with its February fourth quarter earnings report showing a staggering 70% revenue growth and 118% profit growth year-over-year. Management has also said that this is due to expansion across categories, and not just one item that is hot right now. We’ve seen the power of high-end hardware stocks before with companies like Nvidia NVDA, -3.68%, which has quadrupled since the end of 2018 thanks in part to its better graphics cards and now worth $ 370 billion. But what makes Corsair so great is that it is not a competitor to Nvidia; in fact, when people look to build a new gaming rig to incorporate components like the recently released Nvidia GeForce 4k graphics card, they’re likely to update everything else as well. That could allow Corsair to take advantage of this trend in the short term and continue to build on its track record of success. Sea SE, based in Singapore, -2.52% is not well known in the West, but that may change quickly given its 2020 share performance. Over the past 12 months, the stock has risen approximately 420% thanks to incredible growth and great tailwinds behind its unique technology business. That business involves a dominant game catalog offered under the Sea’s Garena brand, led by multiplayer online battle arena (MOBA) games like League of Legends. Not only are the games themselves popular, but related MOBA esports streams are big business too. Note that the 2020 League of Legends championship recorded a total of 139 million viewing hours with a peak audience of 3.8 million people watching at once. While League of Legends is undoubtedly one of the more mature franchises in Sea’s arsenal, the company is certainly not a one-trick pony. Its mobile-friendly MOBA title, Free Fire, was the most downloaded game on the Google Play store in 2019 and only reached 80 million daily users at the end of last year. And it doesn’t stop with just these games. This unique tech stock has divisions that focus on live streaming and social features for gamers, such as user chat and online forums, and a mobile-centric e-commerce marketplace to help with seller services. such as shipping and logistics. That adds up to a company that is uniquely positioned to capitalize on many parts of the gaming ecosystem, making Sea a very attractive option for those looking to harness the full potential of this lucrative industry. Immersion The smallest and most aggressive play on this list. is Immersion IMMR, -5.54%, a $ 350 million stock that is involved with “haptics.” This is the fancy technical term for touch and motion controls that use real-world feedback to allow users to interact with a computer or game console. The shares are up around 50% in the last year, in part due to a lucrative deal with Sony SNE, -1.66% 6758, + 0.13% to produce components for its DualSense controllers that ship with the PlayStation 5. But the company’s long-term potential is bigger than a console, as the Nintendo Witch and Microsoft’s Xbox MSFT, -1.35% also use motion controls. In addition, there is also tremendous potential in the fledgling virtual reality market. There’s a risk here, of course, as haptic tech has become standard fare for gamers only recently and tons of companies are researching new solutions and forging relationships with the biggest names in the space. Diving is certainly not the only one in this gold rush, but its track record is impressive. Thanks in part to its relationship with Sony, the stock went from a modest loss to significant gains in 2020, and based on fiscal 2021 forecast, earnings per share will double going forward as revenue rises 20%. That could give investors a degree of confidence in the long-term potential of this stock. Video Game ETFs If you’re interested in simply playing the broader trend in games and esports without jumping to individual hardware or software names, the best way to do so is through an exchange-traded fund. Three ETFs offer investors a tactical yet diversified investment in this industry. The VanEck vectors ESPO Video Games and Esports ETF, -2.55% is a well-established fund with more than $ 900 million in assets. For just 0.55% in annual expenses, or $ 55 a year for every $ 10,000 invested, you get a global game on this megatrend. Unfortunately, if you’re looking for diversification, the list of components is a bit slim, with only 25 stocks at the moment. However, it will get the big names in the space, including Nintendo and Sea, along with Chinese giant Tencent Holdings 700, -0.91% TCEHY, -3.03%. An alternative is Global X videogames & Esports ETF HERO, -2.68%, which also has about $ 900 million in assets. It charges a cost ratio of slightly less than 0.50% per annum and currently has just over 40 shares. The composition is similar to that of the VanEck ETF, but the longer list means that US equities rank less prominently and only account for about 29% of the portfolio. The smallest in terms of assets is the video game Wedbush ETFMG Tech ETF GAMR, -3.53%. This fund only has a little over $ 100 million in assets under management and charges the highest fees with 0.75% in expenses. However, with 91 positions, it has the deepest bank of the three, with many components from Asia that are difficult for individual US investors to buy as individual stocks. The strategies differ slightly, but one thing has been true for all of these funds lately: big returns for investors. All three have turned in gains above 90% over the past 12 months, showing that they could all offer profitable ways to play the uptrend in video games. Jeff Reeves is a columnist for MarketWatch. You do not own shares in any of the stocks or ETFs mentioned in this article.