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How to expand your investment universe and tap into the online gaming mega-trend

by , 31 October 2019
How to expand your investment universe and tap into the online gaming mega-trend
I remember, when I was younger, how PC gamers were the social pariahs.

Life was simple: The rugby players were the popular ones. The PC gamers were the geeks.

How things have changed!
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Now, a similar opportunity is building. But this unfolding story is a lot BIGGER
Today, geeks earn bigger pay cheques than rugby players!
Don’t believe me?
Let’s consider the prizemoney for the winner of this weekend’s Rugby World Cup final compared to The International – the world championship for a popular multiplayer online battle arena video game: Dota 2.
Surprisingly, the Rugby World Cup tournament organisers don’t just pay out cash to the winner.
Instead, teams get bonuses from their respective associations in relation to their performances on the pitch.
Yet, as it stands, if England pulls one over on the Boks this weekend, the British team stands to make a whopping £7 million (almost $9 million).
Now compare this to OG, the European team who recently won The International for the second year in a row. The first time they won this tournament, they netted $11.2 million. In August this year, OG walked away with $15.6 million.
Not only was it the largest first-place prize earned by any eSports organisation in history, but it also means, in the space of two years, these guys made a cool $26.8 million (almost R400 million) for doing nothing but playing games.
And that was just the winner. Over the last two Internationals, the collective prize pools stood at almost $60 million.
And Dota 2 is certainly not the exception to the rule. The last Fortnite championship had a collective prize pool of $15.3 million, while the League of Legends kitty was a cool $6.5 million.
The geeks shall inherit the earth
But it’s not just the prize money which is growing.
The global eSports gaming scene (and PC and console gaming in general) is rapidly expanding.
And, this expansion is showing no sign of abating.
So, while you might never have thought about becoming a gamer, here’s why you should consider it as a viable investment sector:
It doesn’t matter if your favourite team wins or loses at this year’s Rugby World Cup final…
You have the opportunity to cash in now – WHOEVER wins!
Three solid reasons to invest in the gaming industry
1. It’s a mass demand space: Video games make up one of the largest and fastest growing entertainment industries.
It’s primed to benefit from the increasing global demand for entertainment. In fact, last year, the global gaming industry generated more revenue than TV, the box office and digital music.
2. It is big business: How big is this industry, you ask? Well, by the end of this year, economists estimate the global gaming market will be worth a whopping $152 billion. And yet it’s still showing year-on-year growth of almost 13% per annum.
This is predicted to accelerate, as the gaming population soars thanks to increased globalised internet connectivity and more young people entering the market. By 2025 the industry is predicted to be north of $300 billion.
3. The stakes are high: The gaming industry is similar to the pharmaceutical industry in that any new launch has the potential to dramatically change a company’s fortunes. If a new game, like a new super-drug, happens to become a global blockbuster the profit potential is massive.
The costs associated with creating a game are largely fixed, but if the sales take off (with distribution essentially being free these days), everything the companies earns drops to the bottom line.
So, how do you get exposure to this global gaming mega-trend?
Here are a few of my top sector picks…
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Here is how to invest in the online gaming mega-trend
Here at home, you can invest in Prosus, Naspers’ new international digital company which listed last month. This firm owns a large slice of Tencent. And, as you might recall, Tencent gives you a direct stake in Riot Games, the developers of the ever-popular League of Legends.
Yet, locally this is about the only way you’re going to get listed gaming exposure.
However, if you’ve followed Money Morning for a while, it’s likely you have already shifted some of your portfolio offshore. And that means you have a much wider variety of investment options available to you.
You could look at Electronic Arts Inc (EA) or Activision Blizzard (ATVI) in the sector. Both are large, established players. You could also check out Ubisoft (UBI) who developed fan favourites like the Far Cry and Assassin’s Creed.
But my personal favourite when it comes to direct gaming is Take-Two Interactive (TTWO).
This company developed the massively popular Grand Theft Auto franchise. It’s recently launched Borderlands 3 which managed to sell 5 million copies in the first 5 days of opening. This is around 50% up on Borderlands 2 which was a huge success for the company in previous years.
The big anticipation however will be the release of Grand Theft Auto 5 in 2022 or 2023. As the excitement grows around the next iteration of one of the most popular games in history, I would expect the share price to respond in kind.
Of course, it isn’t just the software developers who are gaining from the increasing popularity of PC gaming.
If you feel you’d like to buy a business which has a more tangible product, you could also consider the hardware manufacturers like Nvidia (NVDA), Intel (INTC) and AMD (AMD). As gaming trends accelerate, they also stand to profit.
After all, without the proper CPUs and graphics cards, you simply can’t play the latest games. Gamers have no choice but to constantly upgrade to better hardware to keep their gaming rigs alive.
So, while we’ll all be hopefully watching the Springboks smash England this weekend, spare a thought for what happens after the game finishes.
Will the kids run outside and start throwing a rugby ball around, or will they drift back to their gaming set and plug back into the crazy competitive world of online gaming?
If you’re interested in investing in any of the 8 stocks I’ve mentioned in today’s article, feel free to drop me a line on support@randswiss.com.
We cover the entire investment value chain, from local money market deposits, to international transfers, to finding the right investment offshore.
So, if you’re tired of ploughing your hard-earned cash into a lacklustre local market, hoping it will eventually turn, perhaps consider: There is a massive and expanding universe of modern international investment options, and they’re only one email away.
Christo Krog,
Rand Swiss, Wealth Manager

How to expand your investment universe and tap into the online gaming mega-trend
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