Videogame stocks have surged higher this year, but this ETF may be investors’ best bet to play the trend.
Videogame stocks have been on a tear this year as the coronavirus has forced consumers to seek entertainment at home.
Call of Duty publisher Activision Blizzard (NASDAQ: ATVI) has gained 53% since the market bottom back in March, Electronic Arts (NASDAQ: EA) is up 45%, and Take-Two Interactive (NASDAQ: TTWO) has risen 68% in the same timeframe.
But in the lsat two weeks, both Activision Blizzard and EA fell after earnings. Activision delivered an earnings beat, but investors took issue with a fall in monthly active users. EA, on the other hand, missed estimates and issued guidance that came in below expectations, but the stock slid on news that it has decided to begin paying out a quarterly dividend.
Ahead of Activision’s earnings, Laffer Tengler Investments’ Nancy Tengler said she was expecting solid earnings results from the videogame publisher.
“I like the setup for Activision going into earnings,” Tengler said. “I think the company benefits from digital gaming consoles, it is going to improve already robust margins of 77.5%, I believe, and the company has done a great job of beating on revenues 17 out of the last 20 quarters.”
But Tengler added that Activision has a catalyst going up. “I’m not a gamer,” Tengler said, “but I do think that Call of Duty Warzone had a great and timely release and the next Call of Duty is going to be released on Nov. 13. So, I think going in, you’ve got a lot of the elements you need.”
But while Tengler likes Activision Blizzard, Tocqueville Asset Management portfolio manager John Petrides says there’s another way to play the videogame space that may be a better bet.
“I think the theme of gaming has such a long runway in front of it that I think the best way to play it is through a thematic ETF like GAMR,” Petrides said.
The GAMR Wedbush ETFMG Video Game Tech ETF—which holds 89 names including more obscure names like Corsair Gaming (NASDAQ: CRSR), Unity Software (NYSE: U), and Gravity (NASDAQ: GRVY)—has gained nearly 93% since the March bottom and is up 59% year-to-date.
“You’re seeing that esports is growing,” Petrides continued. “You’re seeing colleges and universities actually start offering it as a class and have labs and they’re viewing it as a long-term business, emerging business within not only the U.S., but globally.”
“So, instead of playing one individual stock where each of these companies have to rely on the next new game to drive growth, we think it’s best to play it as a thematic way and invest in the whole ecosystem,” Petrides concluded.