When an investor makes an incredible return on an investment, it’s not the stock itself they have to thank.
It’s the theme behind the stock.
Some of the themes making investors rich right now?
Biotech genomes… cloud computing… cannabis… semiconductors… smartphones… driverless cars… I could go on.
For every theme I just listed, there are a ton of different companies operating in that space. Meaning, investors have plenty of opportunities to capitalize on these themes.
However, on a rare occasion, we come across a theme with a ton of potential — but not a ton of investment opportunities.
That is exactly what’s happening right now with esports — unless you know where to look.
First, I’ll briefly review what esports is and where it’s headed. Then I’ll present you with an opportunity to profit from its explosive growth.
Massive Profit Potential in Esports
When I was a kid, everyone was hooked on low-resolution games like Ultima and Doom.
Fast-forward 30 years, though, and video games have undergone a dramatic change. Because video games aren’t just played at home anymore.
Thanks to super-fast internet speeds and advanced technology, gaming has become a multi-billiondollar industry. In fact, it’s now considered an international sport.
That’s right, esports, or “electronic sports, is quickly becoming one of the most popular sports in the world.
Over 2.3 billion people play video games today.
In 2019, the esports industry should top $1.1 billion in revenue. Expect that figure to double in another five years.
That’s because all over the world, tens of millions of viewers are tuning in and streaming esports tournaments and special competitions. According to Forbes, the Overwatch League alone pulled in over 10 million unique viewers with an average audience of over 280,000 per minute.
This level of viewership attracts massive endorsements and marketing.
Let’s compare esports with something we’re very familiar with in the U.S.: football.
Each of the past three years, around 100 million people watched the Super Bowl on average.
In contrast, 500 million people watch esports competitions.
To give you some sense of size, that’s like combining the viewership of Netflix, HBO, ESPN, and Hulu…
The chart to the right compares esports viewership to other sport associations (on the left), with esports already ahead of the MLB, the NBA, and the NHL.
Below that, the chart is predicting that by 2022, the esports audience will blossom from 454 million to an impressive 645 million.
It’s no question that esports is one of the biggest megatrends of our generation. And investors who get in now are poised to make fortunes from its unstoppable growth.
However, there are a few barriers to entry preventing investors from properly capitalizing on this trend.
Some Investments are Better than Others
Right now, the perception of esports as an investment isn’t as strong as it should be.
There are a few reasons for this.
For one thing, some believe they can simply buy blue chip names that have some connection to the esports space and that will suffice. One example being Amazon, for its ownership in gaming platform Twitch.
This is misguided. Investing with that mindset is like buying Disney stock specifically to get the benefit from the movie Frozen II coming out in November.
Then there are other investors who will try and make you believe owning a software game maker — like Take-Two Interactive, Activision, or Electronic Arts — will do the trick. But that will only provide you with a small amount of exposure to this industry.
Of course, investors can pick up some of my favorite esports names — like Sea Ltd., Huya, and Activision Blizzard — individually with their current brokerage account.
But some of the most appealing names only trade on foreign exchanges, thereby limiting their exposure to this space as well.
Lucky for us, I’ve found an esports profit play that allows us to sidestep all of those issues… A Unique Way to Play the Esports Revolution Recently, investment company Roundhill Investments launched a pure-play esports ETF, the Roundhill BITKRAFT Esports and Digital Entertainment ETF (NYSE: NERD). The ticker symbol is pure joy.
A Unique Way to Play the Esports Revolution
Recently, investment company Roundhill Investments launched a pure-play esports ETF, the Roundhill BITKRAFT Esports and Digital Entertainment ETF (NYSE: NERD). The ticker symbol is pure joy.
Typically, you don’t hear about many multimillionaires who generated fortunes buying exchange-traded funds (ETFs) based on the S&P 500 or the Russell 2000 small-cap index.
But this is that rare instance where an ETF is the go-to play, with a few underlying names likely to emerge as future opportunities or holdings.
You see, NERD combines my favorite names listed in the U.S. with some of the strongest names listed only on overseas exchanges.
The ETF has partnered with U.S. Bank for domestic custody of assets along with some sublevel custodians internationally. Deutsche Bank helps plug custodial holes U.S. Bank can’t fill.
The portfolio consists of 25 names, with no one stock making up more than 6% of the holdings based on a quarterly review. The current top 10 are shown on the chart above.
Several holdings are currently above that 6% range, but when the fund rebalances at the end of the quarter, those will be adjusted back down. They only moved higher because they are outperforming other stocks in the portfolio. By maintaining a consistent rebalancing strategy and a tiered weighting system, the ETF avoids concentration risk where one stock can influence the entire portfolio. Roundhill classifies each position as either a pure-play, core, or noncore position based on a proprietary scoring methodology with an added liquidity requirement. These are all key management philosophies we want to see as investors.
