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. That includes a pair of video game behemoths on Tuesday: Activision Blizzard ATVI and Electronic Arts EA.

Earnings reports are always important, but in the cases of Activision and Electronic Arts, these are the companies' first reports in the midst of the coronavirus pandemic, an important point because video game equities and the related exchange traded funds aren't just surviving during the COVID-19 crisis, they're thriving.

With that in mind, here are a few video game and esports ETFs that are worth considering this week.

Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)

The Roundhill BITKRAFT Esports & Digital Entertainment ETF NERD tracks the Roundhill BITKRAFT Esports Index in which Activision Blizzard is a top 10 holding at a weight of 5.14%. Electronic Arts is just outside NERD's top 10 with an allocation of 3.59%.

NERD components can include “video game publishers, streaming network operators, video game tournament and league operators/owners, competitive team owners, and hardware companies,” meaning the fund has one of the broader reaches into the gaming and esports ecosystems.

What makes NERD increasingly relevant in the coronavirus environment is that the fund isn't dedicated to U.S. stocks. In fact, China, where gaming and streaming is thriving due to stay at home orders, is the fund's largest geographic exposure at 24.4% compared to 13.3% for the U.S.

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Global X Video Games & Esports ETF (HERO)

The Global X Video Games & Esports ETF HERO is proof positive that video game exposure is working for investors this year. While the S&P 500 is off more than 12%, HERO is higher by almost 7%.

HERO's run will be tested because the fund devotes almost 12.3% of its combined weight to Activision and Electronic Arts. Those are the fund's third- and fourth-largest holdings, respectively.

“As people spend more time indoors and in isolation, video games and esports serve as an outlet for socialization and entertainment,” said Global X in a recent report. “Since the introduction of widespread stay-at-home efforts, interest in video games and esports has surged. While the spike is recent, we expect new habits to be formed and new users to permanently join a rapidly expanding audience well beyond COVID-19’s impact.”

VanEck Vectors Video Gaming and eSports ETF (ESPO)

The VanEck Vectors Video Gaming and eSports ETF ESPO isn't yet 2 years old, but it's already one of the titans of the esports/video game ETF space with $168.5 million in assets under management, proving there is appetite for thematic funds...if the theme is growing and legitimate.

Investors are being rewarded for their faith in ESPO as the fund is higher by 7.57% this year. Like its aforementioned peers, ESPO faces Tuesday tests due to its almost 12% combined weight to Activision and EA.

Those two stocks are ESPO's fifth- and sixth-largest components, respectively.