COVID-19 has affected different sectors in different ways. The pandemic has significantly increased the number of people staying at home and working from home, as social restrictions have been introduced to slow the spread of the virus. Stocks with exposure to those trends have posted significant returns.
Today, we will discuss two exchange-traded funds (ETFs) that focus on e-sports (or electronic sports) and gaming, two sectors that have experienced positive gains during the coronavirus pandemic.
Numbers from Mordor Intelligence suggest:
“The global gaming market was valued at US$162.32 billion in 2020 and is expected to reach a value of US$295.63 billion by 2026, registering a CAGR of 10.5% over the forecast period (2021 – 2026)… eSports are witnessing substantial market demand in the current market scenario, and are thus driving the overall gaming industry across the globe.”
In e-sports, global video gamers play competitively in championships. For instance, the League of Legends World Championship by Riot Games is currently one of the most important e-sports tournaments, where prize money can be substantial. China leads the list of countries with the highest revenues in the sector.
According to Activision Blizzard (NASDAQ:ATVI), one of the leading names in gaming and interactive entertainment:
“esports will rival the biggest traditional sports leagues in terms of future opportunities, and between advertising, ticket sales, licensing, sponsorships and merchandising, there are tremendous growth areas for this nascent industry.”
Let’s take a closer look.
1. VanEck Vectors Video Gaming and eSports ETF
Current Price: $72.50
52-Week Range: $31.00 – $81.39
Dividend Yield: 0.11%
Expense Ratio: 0.55% per year
The VanEck Vectors Video Gaming and eSports (NYSE:ESPO) gives access to firms that are part of the video game development, mobile gaming, e-sports and related hardware and software space.
ESPO, which tracks the MVIS Global Video Gaming and eSports Index, has 25 holdings. Since its inception in October 2018, assets have grown close to $900 million.
More than 36% of the firms come from the U.S., followed by China (23.13%), Japan (19.40%), Taiwan (7.99%), South Korea (5.54%) and others. Communication services (75.0%), information technology (21.1%) and consumer discretionary (4.0%) are the three sectors in the ETF. Close to 62% of the fund are in the top 10 stocks.
Chinese tech and entertainment group Tencent (OTC:TCEHY) and the Internet and gaming business Bilibili (NASDAQ:BILI); California-headquartered semiconductor giants NVIDIA (NASDAQ:NVDA); and Advanced Micro Devices (NASDAQ:AMD) and Singapore-based Sea Ltd (NYSE:SE), whose platforms cover, e-commerce, digital entertainment and financial services; lead the names in the roster.
Since the start of the year, the fund is up more than 6% and hit a record high in February. And those investors who bought into the fund a year ago have seen returns of over 87%.
With increased hopes for further economic opening in the coming weeks, there could be a shift to shares in other sectors of the economy. Any potential decline, especially below $70, would give investors a better entry point into the ETF.
2. Roundhill BITKRAFT Esports & Digital Entertainment ETF
Current Price: $34.42
52-Week Range: $11.91 – $39.38
Dividend Yield: 0.28%
Expense Ratio: 0.50%
The Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE:NERD) also focuses on e-sports and gaming. The holdings range from streaming network operators to video game publishers, video game tournament and league operators as well as competitive team owners.
NERD, which tracks the Roundhill BITKRAFT Esports Index, has 32 stocks. The top sectors include games (38.5%), hardware (29.0%) and media (23.6%).
Over a quarter of the companies come from the U.S. Next in line are firms based in China (22.6%), followed by South Korea, Sweden, Singapore and Japan.
The leading 10 names holdings comprise more than 45% of NERDS’s net assets, which stand around $130 million. HUYA (NYSE:HUYA), DouYu International (NASDAQ:DOYU), Modern Times (ST:MTGa), Tencent Holdings and Activision Blizzard systems top the list of current holdings.
Year-to-date, NERD is up about 17% and saw a record high in February. Over the past 52 weeks, the fund has returned 126%. Those investors who believe gaming and e-sports represent a long-term opportunity could consider buying the dips, especially if the price goes toward $32.