The top five holdings of this video game ETF are Glu Mobile Inc (GLUU, 5.52% of assets); Take-Two Interactive Software Inc (TTWO, 5.04%); NEXON Co Ltd (NEXOF, 4.95%); Webzen Inc (069080.KS, 4.87%); and Ubisoft Entertainment (UBSFF.PA, 4.79%).
ETFMG Video Game Tech ETF (GAMR)
From The Internet Wealth Builder
Videogames have been a great area to be in this year with the ETFMG Video Game Tech ETF (GAMR), up 53% year to date, as of Oct. 31. The industry itself seems to be in strong shape despite the thinking that console games and PC games would gradually fall out of favor as smart phones and watches gained popularity. This happened to some extent, as for the last three years, games on smart phones have risen steadily in popularity. But although sales of some PC games and consoles are slightly down this year; but overall, they are still very strong.
The top five players in this group are Nintendo (NTDOY), UBIsoft (UBSFF), Electronic Arts (EA), Sony (SNE), and Microsoft (MSFT). Canada has quite a few jobs in this area since Microsoft and Electronic Arts have a significant workforce based in Vancouver.
This year, $35 billion (figures in U.S. dollars) will be spent on video games software, and those sales are often spurred when there is a new console released from Sony, Microsoft, or Nintendo. Microsoft has released its new Xbox One X console, which offers increased power and 4K resolution. Nintendo has upgraded its consoles, while Sony released new hardware last year.
The gaming industry and the movie industry have a lot in common. They are largely driven by new title releases, and with the holidays coming up, you can bet there will be lots of them on the way. We’ve already had announcements of new installments of Activision’s Call of Duty and Ubisoft’s Assassin’s Creed. Electronic Arts is releasing Star Wars Battlefront II. Nintendo has already released Super Mario Odyssey.
Additionally, clever publishers have found ways to facilitate in-game purchases, and that is driving revenues in ways never before thought possible. These in-game purchases are coming in at much higher margins, and in Activision’s case, the company is now getting 80% of its sales from in-game services. Additionally, the businesses have created multi-player gaming platforms, which in EA’s case, brought in $800 million in revenue. Then you have to add in mobile revenue, and for EA, that was $650 million last year.
All in all, the game publishers have been creative in expanding their offerings and therefore dragging in more revenue out of their major titles.
The other opportunity out there for both hardware and software is virtual reality. Still in its early stages, virtual reality promises an immersive experience that apparently greatly enhances the gamers’ experience.
Obviously, there are great opportunities for hardware manufacturers including chipmakers like Nvidia (NVDA). All the handset folks are pilling in and Facebook (FB) made a big investment early on so it will likely be bringing content as well. The software folks will have to step up, so it will be a dynamic situation in this industry for the next few years.
Unlike content creators like newspapers, magazines, broadcast TV, etc., gaming has benefited from the online explosion. It is one entertainment segment that seems protected to some degree from the meltdown that other media companies have faced. It has helped that these companies have also created live gaming contests, held in large, well-attended arenas where thousands of fans gather to watch pro players compete for big money.
So, what should you do to take a stake now in this stable but still growing business? The Gamer ETF I mentioned is a good place to start and its portfolio includes many of the names I have mentioned. However, the fund has limited exposure to Microsoft, Nvidia, and the major Chinese players like Tencent Holdings (TCEHY) that dominate the Chinese gaming market.
Buy GAMR for broad exposure to the gaming sector.
Glenn Rogers in Gordon Pape’s Internet Wealth Builder, www.buildingwealth.ca, 1-888-287-8229, November 20, 2017