Care to guess how many young boys/young men have spent their lock down? My guess is that a decent proportion – going on for at least a third – have spent a large chunk of it in front of games machines or on a PC playing a game.

As I wrote in my FT column back in the summer of last year – https://www.ft.com/content/aa0c7e40-9bef-11e9-9c06-a4640c9feebb – there’s growing evidence that this world of steam and twitch is emerging out of the shadows and into the mainstream via formats being developed by e sports businesses.

Take one example – Fox hosted eNASCAR in place of NASCAR, attracting more than 900,000 viewers and making it the most-watched television event in the history of esports in the US.

Almost a billion people around the world are already watching video game content in general and the global audience for esports is set to grow from 395 million in 2018 to 645 million by 2022, a figure that does not include the most recent

It is worth mentioning one other example – the Steam gaming platform recorded a record number of simultaneous users on 15 March with 20 million online and 6.2 million in-game users. And if you have ever spent any time in Asia, you’ll also know that all forms of gaming – online and offline – are huge amongst the younger populations of Japan, China, Taiwan and beyond.

How you play these trends is always a tad complicated.

Personally, I have long been invested on and off in outfits such as Nvidia and AMD which make the GPUs that power this brave new world. More than a few investors also choose to invest in the games publishers themselves.

Until recently I hadn’t realised that there is in fact a thematic ETF listed in Europe which allows you to access both of these sub sectors plus a few others.

It’s called the VanEck Vectors Video Gaming and eSports UCITS ETF and was launched back in June 2019. It comprises 25 stocks and as you’d expect isn’t exactly cheap in valuation terms – trading at a PE of 26. Geographic exposure is dominated by the US 36%, Japan at 23%, and China 17%.

The ETF aims to “replicate the performance of the MVIS® Global Video Gaming and esports Index as precisely as possible in terms of price and yield (before costs and fees). The index tracks the performance of the global video game and esports industry and, as a pure play concept, only includes companies that generate more than 50 percent of their revenue from video games and/or esports at the time of inclusion.”

I have grown a little wary of thematic ETFs especially when they slightly overclaim – in this case for instance there aren’t that many listed stocks giving access to esports, so in reality this more a video gaming ETF. But in truth there’s nothing wrong with that focus on ‘video’ games  – many of the gaming related businesses have been booming through the crisis.

In the table below I have broken out recent returns for the two versions of this ETF – the dollar one has a ticker ESPO, the sterling ESGB. As you can see this ETF has recently been cooking on gas and VanEck reports that AuM has already passed 100 million euros. As thematic funds go, that’s a very solid result.

Fund returns as of 28^th April 2020

Ticker ESPO –  $

1 month return 14.6%

3 month return 11.7%

6 month return 28%

Ticker ESGB – £

1 month return 14.9%

3 month return 16%

6 month return 31%

I have listed the current portfolio positions below and I have to say this looks a fairly diverse spread of businesses. I am bullish about four of the top five holdings (Nividia, Tencent, AMD and Activision).

My sense is that you probably won’t go far wrong with this ETF if you were to invest in this space.

Top 10 Holdings

NVIDIA CORP 8.40%

TENCENT HOLDINGS LTD 7.90%

ADVANCED MICRO DEVICES INC 6.84%

NINTENDO CO LTD 6.71%

ACTIVISION BLIZZARD INC 6.39%

ELECTRONIC ARTS INC 5.34%

NETEASE INC 4.86%

NEXON CO LTD 4.66%

CD PROJEKT SA 4.53%

ZYNGA INC 4.52%

SUBTOTAL – TOP 10 60.15%

REMAINING HOLDINGS 39.63%

OTHER/CASH 0.22%

TOTAL 100.00%

One last update – apparently VanEck ran a webinar on the space with Ed Lopez, and John Patrick Lee, of VanEck as well as Nicole Pike, Managing Director at Nielsen Esports. Apparently, the three experts “discussed the video gaming and esports scene and the new technologies used by video game publishers”. The webinar replay can be found here.

Peel Hunts’ snapback list

Analysts at Peel Hunt have released another interesting list of stocks to watch out for post Covid. Call it the snapback list of favoured stocks in the FTSE All-Share and AIM 100.

The Times business section mentioned the list as well today.

I quite like Paragon, McCarthy and Stone, Elementis, Workspace and Whitbread.

The FTSE All-Share and AIM 100 companies with the opportunity for the greatest snapback

• Consumer – Bakkavor
• Financials – Paragon & Provident Financial
• Healthcare – UDG & Shield Therapeutics
• Housing, Building Materials & Merchants – McCarthy & Stone & SIG
• Industrials – Elementis, Melrose & PHI Magnesita
• Metals & Mining – Atalaya Mining & Central Asia Metals
• Oil & Gas E&P companies – Cairn Energy & Tullow Oil
• Real Estate – Workspace Group
• Retail – Halfords & Joules
• Support Services – Mears & Signature Aviation
• Technology – accesso
• Transport – Go-Ahead
• Travel & Leisure – The Gym Group & Whitbread

“Key drivers ..

• A broad loosening of lockdown by end of June
• A gradual return to work for most and social distancing in place for the remainder of the current year
• No renewed outbreaks after June that warrant a lockdown
• Government focus on rebuilding and sustaining recoveries. Pro-growth agendas remain in place, whereby Government step up investment across a broad range of industries
• UK Government should consider reduction in VAT, reduction in or holiday from Stamp Duty, helicopter money, a reduction in employment taxes for businesses, a pause in rents for hospitality, cash for bangers ect.
• Job support schemes remain in place
• Shape of recovery resembles a Nike swoosh
• GDP falls by 13% in UK in the current year and 2021 is 5% below previous expectations. Oil demand increases, inflation is subdued and interest rates remain at current levels. Unemployment next year is 6% vs 3.8% last year.”