Video games used to be a pastime — a mostly harmless distraction from the things you should be doing. But today they have grown into a full-fledged competitive sport. The millennials call it eSports.
To older investors, a stadium full of people watching others play video games may seem odd, but it’s a real attraction to this younger demographic and is only expected to get bigger.
Already, elite players are being courted to win tens of millions of dollars in competitions, and global viewership in the in the hundreds of millions — that’s bigger than the Super Bowl!
A recent study from Macquarie found that average concurrent viewership on Twitch, a live-streaming video platform where people can watch eSports, was a record 962,000 in January. The total daily viewership of MSNBC and CNN was 885,000 and 783,000, respectively. That ranks Amazon.com, Inc.’s (NASDAQ:AMZN) Twitch with some of the most-watched cable news channels.
This new world of online gaming is the fastest-growing segment within the larger sports and video game industry. It’s an area I follow closely, especially as it has turned a large number of investments into big-time winners over the last couple of years.
If you’re just hearing about this NexGen mega-trend now, don’t worry. There is still plenty of time to jump on the train and there are many different ways to play the upside.
A Diversified Investment in GAMR
One of my favorite investments here is the ETFMG Video Game Tech ETF (NYSEARCA:GAMR), a basket of 58 stocks related to eSports. About three-fourths of the companies in this exchange-traded fund are software-related, with the remainder based in hardware and other secondary sectors. The top 10 holdings are a mixture of Asian video game developers like Nintendo (OTCMKTS:NTDOY), which closed at an all-time high earlier this week, and you can also find other large-cap U.S. names such as Activision Blizzard, Inc. (NASDAQ:ATVI) and Electronic Arts Inc. (NASDAQ:EA).
The ETF is a global investment as well, with a 36% weighting in Japan, 31% in the United Sates and 10% in South Korea.
GAMR bounced off price support around $45 (the black line) and its 200-day moving average (the red line) amid the broad market sell-off in early February and is now consolidating right around its 50-day average (the blue line). I like it around current prices and see it heading up toward $60 in the years ahead.
GAMR is a fantastic option for those looking to capture the long-term upside in the NexGen eSports sector. And for the investor who wants to add even more profit potential to their portfolio, you can branch out and play the individual action in some of the sector’s and ETF’s strongest names.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.