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MARKETS LIVE BLOG:

STOCKS SLIP WITH MIDEAST TENSIONS, EARNINGS IN PLAY

Oil pares losses as traders anticipate Israel's response to Iranian attack

2 Solid Reasons to Bet on Video Gaming Stocks & ETFs Now

Sanghamitra Saha

Most sound sectors have succumbed to the coronavirus-induced bloodbath in recent times, Technology being no exception. However, not all corners of the technology world were equally beaten down (read: Amid the Tech Slump, Internet ETFs Most Resilient to Virus).

Some areas like video gaming showed strength to a large extent. Undiscerning selling might have hurt these video gaming stocks and ETFs moderately in the past month but the extent of loss was much lesser than the broader market S&P 500 Index (down 20.6% in the past month).

Let’s enumerate the reasons.

Coronavirus Shutdown Boosts Viewerships

Increasing lockdowns and self-isolations led to an increase in video game usage and live streaming. Per US telecom firm Verizon,  online gaming jumped 75% during peak hours in North America while streaming gained 12% amid the pandemic. According to a StreamElements and Arsenal.gg report, global viewership rose 10% on Twitch and 15% on YouTube Gaming lately (read: ETFs to Ride on Rising Gaming Fervor Amid Coronavirus Scare).

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Amid the current crisis,online games like Fortnite and Call of Duty are climbing the popularity charts. Additionally, Nintendo's Animal Crossing: New Horizonsand Bethesda Softworks’ Doom Eternal, launched on Mar 20, are providing a great boost to the gaming stocks.

New Super Cycle Awaits

The video gaming industry is now on the verge of entering a “new super cycle.” And some analysts are betting big on this new cycle, which has the potential to dole out profits of 8X to 18X, as indicated by Olivier Garret, CEO of RiskHedge.

The mega announcements made in the recent past were Sony’s SNE expected launch of PlayStation 5 in holiday season 2020. Microsoft MSFT will also likely present its “next-gen” console — Project Scarlett — in 2020 holidays (read: Best Thematic ETFs for 2020).

Last time that the duo startled the video game market with such big announcements was in 2013. The article also highlighted investment bank Cowen’s view which says, “Activision, Take-Two, and Electronic Arts beat the stock market by an average of 26% in the year leading up to the last three major console launches, which occurred in 2000, 2005, and 2013.”

Below we highlight a few video-gaming ETFs and stocks that have outperformed the S&P 500 lately (down 20.6% in the past month) in terms of returns. These stocks and ETFs are poised to fare better in the coming days on the back of above-mentioned fundamentals.

ETF Picks

ETFMG Video Game Tech ETF GAMR

GAMR follows companies actively involved in the electronic gaming industry, including the entertainment, education and simulation segments. It charges 75 bps in fees. The fund added 4.8% on Mar 26 and lost 8.3% past month (read: Defiance's AUGR ETF Debuts as Video Gaming ETF (VIDG)).

VanEck Vectors Video Gaming and eSports ETF ESPO

The fund ESPO follows the MVIS Global Video Gaming and eSports Index, which intends to track the overall performance of companies involved in video game development, eSports, and related hardware and software. The fund charges 55 bps in fees. The fund gained about 4% on Mar 26 an lost only 3.8% past month (read: Capture the eSports Craze with this ETF).

Global X Video Games & Esports ETF HERO

The fund provides exposure to companies positioned to benefit from increased consumption related to video games & esports, including companies whose principal business is in video game development/publishing, video game & esports content distribution & streaming, operating/owning esports leagues/teams & producing video game/esports hardware. The fund charges 50 bps in fees. The fund lost 6.7% past month and added 3.7% on Mar 26 (read: ETFs to Ride on Rising Gaming Fervor Amid Coronavirus Scare).

Stock Picks

Activision Blizzard Inc ATVI

The Zacks Rank #3 (Hold) leading developer and publisher of console and online games comes from a favorable Zacks industry (top 21%).The stock was down 2.8% past month and was up 9.2% on Mar 26.

NetEase Inc. NTES

The Zacks Rank #2 company is a leading Internet and online game services provider in China. The stock hails from a favorable Zacks industry (top 37%). The stock retreated about 8% past month and was up 3.3% on Mar 26 (read: Should You Buy China ETFs as Coronavirus Cases Wane?).

Sony Corporation SNE

Japan‘s Sony Corporation designs, manufactures and sales several consumer and industrial electronic equipment. It has a Zacks Rank #3 (Hold). The impending launch of PlayStation 5 puts this stock in a sweet spot. The stock belongs to a favorable Zacks industry (top 37%). The stock was off 5.4% past month and gained 4.9% on Mar 26.

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Sony Corporation (SNE) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
 
Global X Video Games & Esports ETF (HERO): ETF Research Reports
 
NetEase, Inc. (NTES) : Free Stock Analysis Report
 
ETFMG Video Game Tech ETF (GAMR): ETF Research Reports
 
VanEck Vectors Video Gaming and eSports ETF (ESPO): ETF Research Reports
 
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Zacks Investment Research
 
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report