3 Funds Riding on Video Games and Streaming Services

The universe of indoor gaming, e-sports and streaming shows has attracted significant attention owing to the segment’s ability to offer an impressive mode of entertainment. In fact, this world of indoor entertainment has garnered more limelight in the last few months because of the deadly coronavirus pandemic that has confined millions to their homes around the world.

In addition, several technology giants have now come up with free gaming options and new applications to benefit from this rise in demand for indoor entertainment. Mutual fund investors could thus take a look at this particular segment from an investment perspective.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Video Games and Streaming Giants Come to Rescue” data-reactid=”21″>Video Games and Streaming Giants Come to Rescue

When the lockdown was first put in place, homebound Americans paid attention to hoarding food and essential products. But as days went by, they turned their attention to entertainment options such as video games, e-sports and video streaming. In fact, sales of video games in the United States increased in March to hit a 12-year high.

Speaking of video streaming, service providers such as Netflix and Amazon Prime witnessed a sharp surge in the number of subscribers amid the lockdown. Netflix added 15.77 million new subscribers around the world in first-quarter 2020, up 22.8% from first-quarter 2019 as a result of the social distancing and stay-at-home measures. Earlier this month, Disney also announced that its streaming service, Disney Plus, had already hit 50 million subscribers since its launch in November 2019.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Coming to the space of video games and e-sports, Alphabet’s YouTube, Microsoft’s Mixer and Amazon’s Twitch have garnered attention apart from gaming giants such as Electronic Arts Inc., Take-Two Interactive Software, Inc. and Tencent Holdings Limited etc. Amazon Prime’s Twitch Prime is also offering numerous free games and in-game content to its video players. These features are available for games such as Destiny 2, Apex Legends, and Rainbow Six Siege.” data-reactid=”24″>Coming to the space of video games and e-sports, Alphabet’s YouTube, Microsoft’s Mixer and Amazon’s Twitch have garnered attention apart from gaming giants such as Electronic Arts Inc., Take-Two Interactive Software, Inc. and Tencent Holdings Limited etc. Amazon Prime’s Twitch Prime is also offering numerous free games and in-game content to its video players. These features are available for games such as Destiny 2, Apex Legends, and Rainbow Six Siege.

In addition, earlier this month, Google made its game-streaming service Stadia free for anyone with a Gmail account. Google account holders can sign up and receive the “Pro” edition with a bunch of built-in games for two months. Facebook has also taken initiatives to ramp up its games in the video games streaming space with its dedicated mobile app called Facebook Gaming.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="eSports Market Has Promising Prospects” data-reactid=”26″>eSports Market Has Promising Prospects

Taking a look at what has happened so far in the e-sports market and what lies ahead, one finds that the industry has witnessed notable growth with video games. This is because the segment has attracted massive streams of revenues over the past few years. In fact, the overall e-sports market is expected to grow from $694.2 million in 2017 to $2,174.8 million by 2023 at a compound annual growth rate of 18.6% in the 2018-2023 period, according to MarketsandMarkets data.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="3 Funds to Buy” data-reactid=”28″>3 Funds to Buy

We have, therefore, selected three mutual funds that have invested in some of the aforementioned companies. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.

We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Fidelity Select Technology Portfolio FSPTX aims for capital growth. The fund invests the majority of its assets in securities of technology companies. Netflix Inc, Microsoft Corp and Facebook Inc A are among the fund’s top holdings. The non-diversified fund invests in securities of U.S. and non-U.S. issuers alike. FSPTX carries a Zacks Mutual Fund Rank #1.” data-reactid=”32″>Fidelity Select Technology Portfolio FSPTX aims for capital growth. The fund invests the majority of its assets in securities of technology companies. Netflix Inc, Microsoft Corp and Facebook Inc A are among the fund’s top holdings. The non-diversified fund invests in securities of U.S. and non-U.S. issuers alike. FSPTX carries a Zacks Mutual Fund Rank #1.

This Zacks Sector – Tech has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.