+ 0.40
+ 0.12%
+ 1.41
+ 0.41%
+ 1.40
+ 0.34%
+ 1.00
+ 0.6%

Slow Start Belies This New ETF's Massive Potential

December 17, 2018 8:24 am
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More

New exchange traded funds that debuted in October experienced the same elevated market volatility as their established counterparts. That doesn't mean the underlying investment ideas for October's crop of new ETFs is damaged.

Take the VanEck Vectors Video Gaming and eSports ETF (NYSE:ESPO), which debuted Oct. 16.

What Happened

The VanEck Vectors Video Gaming and eSports ETF, the second U.S.-listed ETF aimed at the e-sports and video game industries, is off about 10 percent since coming to market. Many of the fund's 25 components can be classified as growth or momentum stocks, two investment factors that fell out of favor in October.

While ESPO and its components did not perform well in October, other data points indicate the tenth month of the year was healthy for the video game industry.

“Vdeo game sales posted record-setting revenue numbers, the highest of any October since at least the mid-1990s,” said VanEck in a recent research piece. “We also saw the announcement of a flagship game being released as mobile-only, underscoring how publishers are adapting to the changing demands of consumers who are playing more games (and generating revenues) on their mobile devices.”

Why It's Important

ESPO's slump right of the gate could present prescient investors an opportunity to get involved with the new ETF.

“Also in October, a broad market pullback developed, which has affected some video game publishers and chipmakers,” said VanEck. “This market correction may present opportunities, as lower prices are now presenting relatively attractive valuations for companies affected by the downturn.”

ESPO follows the MVIS Global Video Gaming and eSports Index (MVESPOTR). That benchmark is “intended to track the overall performance of companies involved in video game development, esports, and related hardware and software,” according to VanEck.

What's Next

Recently released new titles could lift ESPO heading into the new year, particularly as holiday shoppers rush to scoop up those games.

“Two blockbuster releases drove this revenue number. Rockstar’s Red Dead Redemption 2 sold $725M worth of copies within the first three days of its release,” said VanEck. “Earlier in October, Activision’s Call of Duty: Black Ops 4 was released and earned $500M in sales in three days.”

Related Links:

An Upgrade For Real Estate ETFs

A New Global Bond ETF

Related Articles

For Some Video Game ETFs, It Was Fun While It Lasted With GameStop

GameStop (NYSE: GME) giveth and it taketh away. The brazen short squeeze orchestrated by members of the Reddit forum WallStreetBets is on life support, at least for the time being, after shares of the video game retailer plunged 60% Tuesday, taking the stock down to $90. Just last week, it hit $483. read more

The Future Of Gaming Is Not In New Consoles

Historically, new product launches have been the sun around which the gaming industry operates.  read more

Riding The Esports Excellence With ESPO

Video game and esports exchange-traded funds are getting plenty of love this year and rightfully, but software sales surging owing to coronavirus shelter-in-place directives, the esports in these funds is going overlooked. read more

Ready Player One: 3 ETFs For Video Game Earnings

This will be another busy week on the earnings front as more than 140 S&P 500 members deliver quarterly results. read more