Wall Street and Big Media were totally obsessed with the recent saga of GameStop Corp. (GME).
It’s easy to see why. Wealthy short-sellers took a run at the struggling retailer only to get their heads handed to them.
The story had all the elements of a thriller. Young upstarts using their mobile phones were taking on billionaires – and winning, at least for a time as GameStop soared an amazing 1,600%.
The CEO of Robinhood, a trading platform popular with young people, defended the firm’s actions during this episode at a Congressional hearing in what now appears to be a massive stock bubble.
Here’s the thing. The focus on GameStop’s trading frenzy obscured a very important and lucrative trend.
Fact is, computer gaming in the digital age is huge. Mordor Intelligence values the sector at $163 billion, which will climb 82% by 2026 to $295.6 billion.
An Up-And-Coming Sector
Right now, the gaming industry is surging on the back of several trends. The Covid lockdowns of 2020 forced people to find their own entertainment at home, and many people turned to video games.
According to Simon-Kucher & Partners, the number of people who play five hours a week or more jumped by 30% over 2020 – and is expected to stay 17% higher after Covid goes away.
Meanwhile, video game sales in North America alone surged by almost 27% over the year.
Add to that the launch of the latest Xbox from Microsoft Corp. (MSFT) and Playstation from Sony Corp. (SNE) gaming consoles late last year which saw the consoles flying off the shelves, and you can see how the gaming industry is in a great position.
But there’s more to gaming than just the hardware and games themselves.
Over the last few years, the Internet has made video gaming an increasingly social pastime. Competitive gaming – commonly referred to as eSports, is becoming massive.
SuperData valued the eSports market at $748 million in 2015. In 2020, that number had ballooned to over $950 million according to Statista, and was forecast to hit almost $1.6 billion in 2023.
That’s a 68% jump in just three years.
The figure includes sponsorships, advertising, team prizes, fantasy sites, and ticket sales to both in-person and online events.
In short, eSports may not be getting the coverage of football or baseball, but millions of people tune in online or show up at stadiums in person to watch eSports.
The best way to play this is the Global X Video Games & Esports ETF (HERO). With this one investment, you get exposure to a wide swath of companies set to benefit from the growth in eSports and video games, including American gaming and hardware giants like Activision Blizzard Inc. (ATVI), NVIDIA Corp. (NVDA), and Electronic Arts Inc. (EA).
Covering the Trend
But all of that is just the start. HERO includes everything from firms that run eSports leagues or teams, firms that make the hardware the eSports competitors and video game players use, to game developers and publishers, and even the companies that help stream video games over the Internet.
Take a look:
- Nintendo Co. Ltd. (NTDOY) needs little introduction. This Japanese gaming giant behind the Gameboy, NES, and SNES of yore, to the currently widely popular Switch console, continues to put out great home and mobile consoles as well as very popular games. Nintendo has also perfected the art of business partnerships, making a slew of highly-rated Pokemon games under license to its many consoles, and even helping with the popular Pokemon GO smartphone game.
- Bilibili Inc. (BILI) is a Chinese video-sharing website and service with over 31 million users. The firm also offers some games on its platform. But the reason for its inclusion in the HERO ETF is Bilibili’s 2017 and 2018 purchases of eSports teams in the League of Legends and Overwatch games, and the company’s broadcasting of the annual League of Legends World Championship, the most-watched eSports event in the world, in China.
- Zynga Inc. (ZNGA) may not sound familiar, but it’s actually the largest mobile game developer in the country. Its best-known game is Farmville, which was all the rage in the early days of Facebook. In fact, in 2011, Zynga was responsible for a whopping 19% of Facebook’s revenue. But Zynga isn’t resting on its laurels, nor depending too much on Facebook. As of the end of 202, Zynga had 134 million monthly active users across its games, including the popular Words with Friends mobile gaming franchise.
- NetEase Inc. (NTES) is a Chinese online service company, with content, e-commerce, and social media platforms, as well as a large gaming division. The firm has launched several of its own games, including the popular in China Westward Journey series, but is known in the West as the operator-of-choice for Western game companies looking to have their online games run in China, for which NetEase takes a nice cut. For example, the hugely successful Activision Blizzard games such as World of Warcraft, Overwatch, Hearthstone, Diablo, and StarCraft are all run by NetEase in China, as are other games such as Minecraft and EVE Online.
Since the market rebounded on March 23, 2020, and HERO had its peak profits on February 22, the ETF gained 155.4%. Over that same period, the S&P did less than half as well, even after gaining a historic 73.26%.
And as video gaming habits and gaming hardware picked up during Covid show no signs of going away, I still see plenty of upside ahead.
HERO is a great way to play the broad field of digital gaming in a way that will bolster your net worth for years to come.
And you can boost your gain potential even higher by playing even more leading tech firms, in other high growth sectors like fintech and e-commerce, with the potential to score market-crushing gains.
I provide exactly these kinds of plays every month to subscribers to my Nova-X Report investing newsletter. I even say exactly when to buy and when to sell for maximum profits. You can check it out right here.
Cheers and good investing,
Michael A. Robinson