A Holiday Treat With a Video Game ETF
This article was originally published on ETFTrends.com.
The VanEck Vectors Video Gaming and eSports ETF (ESPO) , the second exchange traded fund offering exposure to the booming video game and eSports markets, debuted two months ago, just in time for the holiday shopping season.
ESPO seeks to track the performance of the MVIS® Global Video Gaming and eSports Index (MVESPO). The index is a rules-based, modified capitalization weighted, float adjusted index intended to give investors a means of tracking the overall performance of companies involved in video gaming and eSports. Various data points indicate ESPO was a well-timed launch among this year's rookie ETFs.
“October was a big month for the video game industry on a number of fronts,” said VanEck in a recent note. “First, video game sales posted record-setting revenue numbers, the highest of any October since at least the mid-1990s. We also saw the announcement of a flagship game being released as mobile-only, underscoring how publishers are adapting to the changing demands of consumers who are playing more games (and generating revenues) on their mobile devices.”
ESPO holds 25 stocks, 94.70% of which hail from the communication services and technology sectors. Consumer discretionary names represent 5.50% of the fund's weight.
Impressive Data
Several data points underscore the notion that ESPO debuted at the right time.
“According to NPD Group, video game spending hit $1.55B in October, the highest for any October since NPD began tracking the market in 1995,” said VanEck. “Two blockbuster releases drove this revenue number. Rockstar’s Red Dead Redemption 2 sold $725M worth of copies within the first three days of its release.”
Activision Blizzard (ATVI), nearly 5% of ESPO's weight and the ETF's ninth-largest holding, released Call of Duty: Black Ops 4 in October as well.
“Analysts are predicting that the widespread popularity of Black Ops 4 will chip away at Fortnite’s dedicated user base, reinforcing the notion that the continual release of new games provides a number of benefits for both publishers and consumers,” according to VanEck.
Broader market weakness and the US/China trade spat have hindered ESPO's performance the fund came to market, but long-term industry fundamentals look strong.
“We believe, lower prices are now presenting relatively attractive valuations, compared to levels from only a few months ago. The video game industry, boosted by the rise of esports, sits at the forefront of global cultural consciousness, and video gaming revenues remain robust,” according to VanEck.
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