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Video Gaming ETFs to Continue Gaining Amid Coronavirus Crisis

Sweta Jaiswal, FRM

The coronavirus outbreak continues to wreak havoc in the United States as around 36 states are now reporting a rising number of infected cases. Going by Johns Hopkins University data, the United States has already seen around 2.54 million confirmed cases, with a death toll of at least 125,747. Given the rising number of coronavirus cases, some states have started to pause the reopening process.

It has been observed that the coronavirus-induced lockdown has boosted demand for video games. Per the NPD Group report, the U.S. video game industry witnessed record sales across hardware, software, accessories and game cards, totaling $977 million (up 52% year over year) in May (highest since May 2008), after gaining around 73% year over year in April.

In fact, going by the World Economic Forum (WEF), the global video game market is expected to value around $159 billion in 2020 (per The ASEAN Post article). According to the same article, the figure will be four times box office revenues ($43 billion in 2019) and about three times revenues from the music industry ($57 billion in 2019).

Video Gaming Industry Sees Rising Demand

Coronavirus has resulted in drastic changes in lifestyle and preferences of people so as to abide by the social-distancing measures. Even with the states reopening and easing social-distancing norms, people have been still trying to minimize human-to-human contact.

The NPD Group report further states that Call of Duty: Modern Warfare stood out as the best-selling game, followed by Grand Theft Auto and Nintendo’s NTDOY Animal Crossing: New Horizons. Going on, the report shows that there was a 56% surge in console sales with the Nintendo Switch topping the sales numbers.

Going by forecasts by Newzoo,  a market research firm specializing in games and e-sports analytics, console gaming sales including PlayStation 4 and Nintendo Switch are expected to surge 6.8% year over year to $45.2 billion in this year. Meanwhile, PC gaming is estimated to rise 4.8% year over year to $36.9 billion in 2020.

Video Game ETFs to Shine

Against this backdrop, investors can take a look at the following ETFs:

VanEck Vectors Video Gaming and eSports ETF ESPO

The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Video Gaming and eSports Index, which is intended to track the overall performance of companies involved in video game development, esports, and related hardware and software. It holds 25 stocks in its basket. Top gaming companies like Nintendo and Activision Blizzard ATVI have spots in the first ten holdings. With AUM of $287.7 million, the fund charges 55 basis points in expense ratio (read: Esports & Gaming Industry on a Tear: ETFs to Bet On).

Global X Video Games & Esports ETF HERO

The fund seeks to invest in companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality. It holds 41 stocks in its basket. Big gaming companies like Nintendo, Activision Blizzard and Zynga ZNGA are in the top ten holdings. With AUM of $122.2 million, the fund charges 50 basis points in expense ratio (read: Top Sector of 1H & Its Top ETFs).

Wedbush ETFMG Video Game Tech ETF GAMR

The fund provides pure-play and diversified exposure to a dynamic intersection of technology and entertainment. It also corresponds generally to the price and yield performance of the EEFund Video Game Tech Index. The index is designed to reflect the performance of companies involved in the video game technology industry, including game developers, console and chip manufacturers and game retailers. It holds 88 stocks in its basket. With AUM of $96.8 million, the fund charges 75 basis points in expense ratio.

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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
 
Global X Video Games Esports ETF (HERO): ETF Research Reports
 
Nintendo Co. (NTDOY) : Free Stock Analysis Report
 
Zynga Inc. (ZNGA) : Free Stock Analysis Report
 
Wedbush ETFMG Video Game Tech ETF (GAMR): ETF Research Reports
 
VanEck Vectors Video Gaming and eSports ETF (ESPO): ETF Research Reports
 
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