Trend Investing: Can Video Game & eSports Stocks Continue To Soar?

David Dierking

One sector of the market that has come up frequently in my research this year is video gaming and e-sports.

The growth of this segment has been huge this year thanks to people looking for entertainment options during the coronavirus pandemic. But this sector was growing quickly well before COVID and it will grow quickly even after COVID.

The global games market is expected to grow around 9% per year through 2022. That includes games played on a traditional console, such as the Microsoft XBox or Sony Playstation, as well as mobile games played on a phone.

191016-Introducing_HERO-04

The Esports market is expected to grow even faster. Growing at an estimated 12% over the next several years, the Esports audience is currently around 450 million people worldwide.

191016-Introducing_HERO-05

The ETF I'm watching here is the Global X Video Games & Esports ETF (HERO).

Like many niche tech plays this year, HERO has beaten the S&P 500, Nasdaq Composite and Nasdaq 100 by a wide margin, returning more than 45% year-to-date.

HERO_^MSWNTR_^SPX_^IXIC_^NDX_chart

If you look at the daily chart, you'll see the fund has been on a steady climb since the March bear market low.

HERO_technical_chart

It's taken a bit of a breather over the past two weeks and has pulled back from its peak at around $25 to just under $24 today. That decline means HERO is no longer in overbought territory according to the relative strength index, but puts it in a bit of a precarious position.

The share price is right at its 4-month long trendline and looks like it could now move in either direction. Based on the sector's long-term growth potential, I wouldn't necessarily sell HERO at this point, but don't be surprised to see a further modest pullback here either.

Video Game & Esports ETF List

  • Global X Video Games & Esports ETF (HERO)
  • ETFMG Video Game Tech ETF (GAMR)
  • Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)
  • VanEck Vectors Video Gaming & Esports ETF (ESPO)

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