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David England: Keeping an eye on the esports explosion
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David England: Keeping an eye on the esports explosion

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Last week, I stated that if a correction does not happen in September, then look for one in October. Although many like to see what they own continue to go up, actually it is quite healthy for pullbacks to occur. Why? You can be rewarded by locking in profits. Once the selling stops and buying comes in, it gives opportunities to get into the previously strong securities for their next run.

This is why I am very excited about the current series, introducing you to new areas of the market. My featured funds and their leading companies may be in the group of highest performers leading the way once a pullback is over.

David England: There's a lot to love with 5G funds

Here are your action points: Each week, add to the list of top funds and companies in each featured group. Place them in a watch list portfolio. Review the Simple Simon buy and sell systems to help with your buying and selling decisions. Beginning traders and investors should always paper trade before ever putting any hard-earned money to work.

Today, I focus on the esports and gaming industry, an exciting group I have been watching for some time. Frankly, I didn’t think they would gain traction with investors and traders. I was wrong. With the high trading volume of some of these funds and companies, it shows the institutions are believers in this area.

So, what exactly is esports? The e stands for electronic and esports is a term that describes competitive video gaming at a professional level. Millions of people are involved internationally with billions of dollars on the table. With challenges in professional sports, I see esports becoming a respectable competitor in the next couple of years. Within five years, I see it cracking into the top four of professional sports.

Let’s identify the more popular esports exchange-traded funds, trading on our U.S. exchanges.

NERD-Roundhill BITKRAFT Esports & Digital Entertainment ETF tracks the total return performance, before fees and expenses, of the Roundhill BITKRAFT Esports Index. The Index tracks the performance of the common stock of exchange-listed companies across the globe that earn revenue from electronic sports, or esports related business activities.

GAMR-Wedbush ETFMG Video Game Tech ETF seeks to provide investment results that correspond to the price and yield performance of the EE Fund Video Game Tech Index. The Index tracks the performance of the common stock of companies across the globe, actively engaged in a business activity supporting or utilizing the video gaming industry.

David England: Looking at the popular digital field

BJK-VanEck Vectors Gaming ETF seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the S-Network Global Gaming Index. The Fund seeks to invest at least 80% of its total assets in equity securities of U.S. and foreign companies primarily engaged in the global gaming industry.

ESPO-VanEck Vectors Video Gaming & eSports ETF replicates as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Video Gaming & eSports Index. The Index consists of video gaming and eSports companies including small and medium-capitalization companies and foreign and emerging market issuers.

To see the performance of these select ETFs compared to the performance of the U.S. markets ($SPX), I designed a chart beginning on March 24 to real-time. 

eSports and Gaming ETFs

NERD-Roundhill BITKRAFT Esports & Digital Entertainment ETF took top honors with an impressive 98% return. GAMR-Wedbush ETFMG Video Game Tech ETF is up 78% while BJK-VanEck Vectors Gaming ETF is up 77%. ESPO-VanEck Vectors Video Gaming & eSports ETF is the laggard in the group up 72%. The benchmark index, the U.S. S&P 500 is up 52%. 

Here are the key points: During this timeframe, all ETFs had impressive, above-average returns. All four funds outperformed the SPX by impressive amounts. The top fund NERD outperformed the SPX by almost 50%. Before investing, take time to learn each index and more importantly, the difference between each index. Never invest in something you do not understand what they do.

Increased volume within this group meaning more institutions are moving funds into this increasingly popular sector. Watch these groups' performance when profit taking hits the major indexes. The funds that pullback the least would be the best candidates to consider when the next upturn begins.

Next, let's identify the top companies in the top-performing NERD-Roundhill BITKRAFT esports & Digital Entertainment ETF. The companies and a brief description along with country of origin are as follows:

SE-Sea Ltd. (Singapore) is an internet and mobile platform company. The firm engages in the provision of online gaming services. It operates through the following segments: Digital Entertainment, E-Commerce and Digital Financial Services.

David England: Looking at what isn't being noticed

HEAR-Turtle Beach Corp. (San Diego) engages in the development, commercialization, and marketing of audio peripherals.

DOYU-DouYu International Holdings Ltd. (Wuhan, China) develops and operates a game-centric live streaming platform in China, both on personal computer and mobile apps.

HUYA-HUYA Inc. (Guangzhou, China) is a holding company, which engages in the development of game live streaming platforms. The company provides live streaming content for mobile, personal computer, and console games. It also offers content to other entertainment genres, such as talent shows, anime, and outdoor activities.

NTES-NetEase Inc. (Beijing, China) is an internet technology company, which develops premium online services centered around content, community, communication, and commerce. It develops and operates PC-client and mobile games, and other innovative services, including live video streaming, and music streaming worldwide.

I am sure most readers will not be familiar with some of these companies. Don’t feel bad, I didn’t either — but with these returns, I do now.

To see the performance of these top companies compared to the NERD, I designed a chart beginning on March 24 to real-time.

NERD top companies

SE-Sea Ltd. took top honors with a shocking 274% return. HEAR-Turtle Beach Corp. is up 255%. DOYU-DouYu International Holdings Ltd. up 131%, HUYA- HUYA Inc. up 99% and NTES-NetEase Inc. up 56%. The benchmark fund NERD-the green shaded area was up 98%. 

Here are the action points: During this timeframe, three companies outperformed the index NERD, while three did not. The leader, SE-Sea Ltd, ran well over 320% before profit trading hit last week.

Take the time to do your due diligence on each fund, which index they track and its holdings. Spend time to research the balance of the top companies to see if one may be next to run like SE, HEAR and DOYU.

Once the companies are identified, set alerts to let you know when one breaks out. Then use the Simple Simon buy system to help with decisions.

In full disclosure, I do not hold any securities listed.

Plan your work, work your plan, and share your harvest!


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