We’re addicted to our screens … this is driving a new generation of investment winners … one specific corner of the market poised to continue making investors money
They’re uninformed. They’re entitled and selfish.
They’re passionate about their “careers” — but don’t know how to work hard.
They love avocado toast (whatever that is).
Any guesses as to which generation our macro investment specialist, Eric Fry, is referencing above?
It’s actually two of them …
Millennials, and the Gen Z’ers right behind them.
Now, in Eric’s recent “3,000% Technology Revolution” special report, he’s quick to clarify that these stereotypes are unfair (and avocado toast is delicious, even for a Gen X’er like me).
However, there is a one defining characteristic of these generations that’s absolutely true. And it’s driving the next evolution of our broad society’s way of “doing life.”
The screen-based lifestyle.
This transformation is not simply a fad, craze, or generational quirk.
It is a megatrend — and it will impact our daily lives in ways we can scarcely imagine today.
In his special report, Eric writes that millennials and “zoomers” are the first “screen time” generations.
Below you can see how their lifestyle has driven up hourly usage of screens. In 2018, American adults averaged more than six hours per day — and it’s certainly increased since then.
There’s a simple reality driving this screen-time adoption — it is literally possible to conduct every necessary daily activity, and many unnecessary ones, without ever speaking to another human.
From an investment perspective, the early winners of this screen-time explosion included the obvious big names like Apple, Amazon, Facebook, and Google.
Then there was a second-generation of winners. Think Nvidia, or dating app company, Match, or payment processor, Square.
But the trend is hardly done creating investment winners.
Back to Eric:
… the best is yet to come. The Screen Time Megatrend is just getting underway. It’s barely in the second inning.
The first and second movers pioneered a brave new world that was fraught with danger and risk. Each of them could have failed miserably. In fact, most of them flirted with disaster for long stretches before turning the corner and establishing themselves as powerful and profitable enterprises.
But now, thanks to the survival of the fittest first and second movers, the Screen Time Megatrend is underway — and it will power dozens of third-mover companies to spectacular success.
In Eric’s special report, he profiles three corners of the market he expects to enjoy more success. In our Digest today, let’s zero in on one of them — online gaming and eSports. We’ll also point out a specific gaming company Eric has highlighted several times in recent months.
Let’s jump in.
***The quintessentially millennial/zoomer pastime that “has become a worldwide phenomenon”
Eric begins by explaining how even before sheltering in place became a thing, literally billions of people throughout the U.S., China, Japan, and elsewhere were spending multiple hours per day playing video games of one kind or another.
So, how many? And what sort of dollar figures were attached?
In North America, gamers spent more than $32 billion on their pastime last year. For context, that’s triple the amount Americans spent on movie theater tickets.
Globally, 2.5 billion gamers spent about $150 billion on games in 2019, according to Newzoo’s “Global Games Market Report.”
You can see global gaming revenues below. Notice the consistent growth since 2012, as well as the forecast of next year’s growth.
Here’s more from Eric:
Literally billions of people throughout the United States, China, Japan, and elsewhere spend hours (and hours) every day playing video games of one kind or another.
This phenomenon was becoming the “new normal” even before the coronavirus burst onto the scene. But thanks to shutdowns and shelter-in-place practices around the world, video games in particular and the Screen Time Megatrend in general caught a powerful tailwind.
Eric notes that after the crisis passes, most of these new videogame converts will probably reduce their gaming time … but they won’t eliminate it.
Because of this, the “addressable market” of video gamers has probably increased by tens of millions during the last few months.
***The next $1 billion game market
A relatively recent driver of gaming is the phenomenon known as eSports.
As you’d infer from the name, eSports are video-game competitions between two or more “eAthletes.”
Eric tells us that this sporting genre already boasts a global audience of nearly 500 billion people, while also generating nearly $1 billion in total revenue.
If you’re having trouble envisioning this, let me help you out.
Yesterday’s videogames looked like this:
Today’s videogames look like below — this is a screenshot from NBA 2K20.
And eSports championship competitions look like this (or at least they did before COVID):
Back to Eric:
Industry analysts expect a slight dip in eSports’ momentum, at least on a professional level, due to COVID-19.
Newzoo, for example, trimmed its eSports revenue estimate for 2020 from $1.1 billion to $1.05 billion as some live events have been canceled.
However, the vast majority of events should proceed as planned. That’s light-years ahead of other pro sports leagues, whose 2020 seasons are mostly canceled.
I certainly don’t expect the virus to affect eSports’ long-term future. Newzoo still sees the industry’s revenues rising to $1.6 billion in 2023, making for a 50% gain in just three years.
***How can an investor play this trend?
One stock Eric recently highlighted back in April and again last week, is Activision Blizzard (ATVI).
(ATVI) publishes many popular games, including console and computer games like “Call of Duty” through its Activision brand, multiplayer online games like “World of Warcraft” and “Overwatch” through Blizzard, and mobile games like “Candy Crush” through King.
Plus, Activision has been amplifying those revenue streams by releasing smartphone versions of its most popular games, like “Call of Duty: Mobile” last October.
And in the eSports world, Activision is absolutely the leader.
It launched the first-ever city-based eSports league for “Overwatch” in 2018, and it kicked off its city-based “Call of Duty” league in January.
It also operates Major League Gaming, the No. 1 online eSports broadcast network. Activision’s eSports revenue reached $648 million in 2019, up 7% from 2018.
Eric notes that ATVI’s total number of monthly active users (MAUs) has soared to 428 million — 30% higher than one year ago.
Last week, the company reported adjusted earnings per share (EPS) of $0.81. That was 52.8% higher than the $0.53 from the same period of the year prior. Even better, it was 19% above Wall Street’s estimate of $0.68.
One part of ATVI’s financial picture especially stood out to Eric — something all the more important today in light of how lockdowns are drying up revenues, leading to permanently-closed doors …
One final item worth mentioning is that the company has a bullet-proof balance sheet — holding more than $3.7 billion of net cash (total cash minus total debt) …
To be clear, balance-sheet strength, by itself, is not a reason to buy a stock. Nor is balance-sheet weakness automatically a reason to sell a stock. But cash is helpful in a crisis, both for survival and for capitalizing on opportunity.
For one additional (bonus) investment option, Eric suggests Electronic Arts (EA). It’s the industry leader in sports simulation games like “Madden NFL” and “FIFA.” It’s up 30% on the year compared to 5% for the S&P.
***Gaming is just one of the sectors poised to benefit from the screen-time megatrend
In Eric’s “3,000% Technology Revolution” special report, he points toward two other beneficiaries.
The first is artificial intelligence; specifically, the “computer vision” enabled by specialized computer chips. These are the “smart eyes” that, as one example, enable a self-driving car to analyze and respond to images in a road.
The second screen-time-opportunity is a way to capitalize on online shopping. You might not realize it, but over the last 10 years, U.S. online retail sales growth has outpaced non-online retail sales growth by 7 to 1.
Bottom-line: more screen-time … more investment gains.
Here’s Eric to take us out:
The Screen Time Megatrend is already a multitrillion-dollar opportunity. The best trades are just getting underway.
Have a good evening,