The video gaming industry has proved to be a winner amid the pandemic with millions of consumers looking for relief from lockdown boredom. While cinemas and theaters closed their doors in an effort to prevent the spread of the disease, many people turned to home entertainment. This boosted user engagement for video games and esports. As a result, gaming companies have seen their sales surge substantially.
Although the rapid deployment of COVID-19 vaccines could mean that people are likely to go outside more often and spend less time playing games, it does not overshadow the fact that the pandemic has also introduced some people to gaming for the first time, who are likely to continue to sink dollars into their new hobby. This should allow some of the leading video game companies to grow their user base even after the pandemic.
Hence, ETFs such as the Global X Video Games & Esports ETF (HERO), VanEck Vectors Video Gaming and eSports ETF (ESPO), and VanEck Vectors Gaming ETF (BJK) are well positioned to capitalize on the expanding global gaming industry and increasing demand for next-generation consoles.
Global X Video Games & Esports ETF (HERO)
HERO invests in companies that are involved in the development of video games, or facilitate the streaming and distribution of video gaming or esports content. The ETF enables investors to have exposure to high-growth companies that are well positioned to benefit from the increasing popularity of video games and esports. It has approximately $973.75 million in assets under management (AUM). HERO’s major holdings include NetEase Inc. (NTES), Sea Ltd. (SE) and Nvidia Corp. (NVDA).
HERO has an expense ratio of 0.5%, higher than its category average of 0.38%. However, the ETF has a stable environmental, social, and government outlook. It has a “BB” MSCI Rating. HERO has gained 109.7% over the past year and 45.1% over the past six months. The ETF pays $0.41 in dividends annually and its four-year average dividend yield is 0.19%.
HERO’s POWR Ratings reflect this promising outlook. The ETF has an overall rating of A, which equates to Strong Buy in our proprietary ratings system.The POWR Ratings are calculated by taking into account 118 different factors with the weighting of each, optimized to improve overall performance.
HERO also has a grade of A for Trade Grade, and Buy & Hold Grade, and a B for Peer Grade. Of the 107 ETFs in the A-rated Technology Equities ETFs category, HERO is ranked #30.
VanEck Vectors Video Gaming and eSports ETF (ESPO)
ESPO invests in companies that are involved in video game development, esports, and related hardware and software. It closely tracks the Global Video Gaming and eSports Index . ESPO looks closely at the fundamentals and associated yield performance of a stock to gauge its growth potential in tandem with prevailing market trends. It has approximately $927.79 million in AUM. ESPO’s major holdings include Tencent Holdings Ltd. (TCEHY), Nvidia Corp. (NVDA) and Bilibili, Inc. (BILI).
The ETF has an MSCI ESG Rating of “BB”, reflecting its resiliency in the environmental, social, and governance issues. ESPO has an expense ratio of 0.55%, which is higher than the category average of 0.38%. The ETF has gained 96% over the past year and 39.4% over the past six months. Its four-year average dividend yield is 0.17%.
It is no surprise that ESPO has an overall rating of A which translates to Strong Buy in our POWR Ratings system. It has an A for Trade Grade, Buy & Hold Grade, and Peer Grade. It is currently ranked #12 out of 45 ETFs in the A-rated Consumer - Focused ETFs category.
VanEck Vectors Gaming ETF (BJK)
With approximately $102.60 million in AUM, BJK is the nation’s first ETF focused on global gaming. It invests in companies that are involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology and gaming equipment. The ETF closely tracks the price and yield performance of Global Gaming Index. BJK’s major holdings include Flutter Entertainment plc (PDYPY), DraftKings, Inc. (DKNG) and Galaxy Entertainment Group.
BJK has an expense ratio of 0.66% compared to the category average of 0.49%. BJK has gained 20% over the past year, and 35.9% over the past six months. The ETF distributes $0.22 in dividends annually, yielding 0.44% at the stock’s current price. Its four-year average dividend yield is 2.9%.
BJK has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. BJK has an A for Trade Grade, Buy & Hold Grade, and a B for Peer Grade. It is currently ranked #23 in the A-rated Consumer – Focused ETFs industry.
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HERO shares were trading at $36.72 per share on Tuesday afternoon, down $0.23 (-0.62%). Year-to-date, HERO has gained 18.26%, versus a 5.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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