By Matt McCallFeb 07, 2018
Here in the United States, we’ve all grown accustomed to the Super Bowl being the biggest sporting event of the year – and it is also big around the world. Just about one out of every three people in the U.S. watched the game, and that’s not to mention that it’s become almost like another holiday with all of the parties that get thrown.
You can believe this old Philadelphia boy was watching! I got together with some of my longtime Philly friends and their families, and seeing the Eagles win their first Super Bowl is a day I will never forget. I even heard out of a friend’s mouth, “This is the greatest day of my life”. That was followed with a few strange looks from his wife and four kids. There were more than a few heart-pounding moments, but they were all worth it in the end.
The Super Bowl has grown exponentially in its 52-year history, which is why companies are willing to dole out $5 million for a 30-second commercial, not including the actual cost of production. Knowing that, it may be hard to imagine anything that could be even bigger than the Super Bowl, but watching our NexGen trends, there is something out there that certainly has that potential.
I’m talking about the emerging mega-trend of eSports, which is a result of the stunning growth in competitive video gaming. To older investors, a stadium full of people watching others play video games may seem odd, but it’s real and it’s only going to get bigger. Already, elite players are being courted to win tens of millions of dollars in competitions, and global viewership is in the hundreds of millions. That’s bigger than the Super Bowl!
This incredible growth is getting the attention of the established sports world as well. For example, one of the most popular games of all time is Madden NFL. Last Thursday, three days before the Super Bowl, ESPN2 broadcast the Madden NFL 18 Club Championship Final live from Minneapolis, where the Super Bowl was also being played on Sunday.
In addition, Disney XD just started airing weekly broadcasts of the Madden NFL Ultimate League, the first U.S. professional league for competitive sports gaming. Electronic Arts (EA) and the CW network drew 670,000 viewers on December 27 when they aired a one-hour, primetime eSports special.
The Leonsis family, owners of the Washington Capitals (NHL) and Washington Wizards (NBA), is betting big on the eSports sector. The Wizards will launch a brand new 2K League team called Wizards District Gaming. They are not alone, either, as the Wizards are now one of 17 teams in the NBA to own an eSports team. The new eSports team is even getting its own practice facility, a 1,300 square foot space next to Capital One Arena in the heart of Washington, D.C.
Zach Leonsis, general manager of Monumental Sports Network, said, “eSports is the biggest thing that most people have never heard of.” He’s right, but it won’t stay that way for long.
There is now a National Association of Collegiate eSports, which has about 50 colleges participating in eSports with varsity teams, and even the Olympics is getting into it. Intel (INTC), a leading chip company and Olympics sponsor, just wrapped up its eSports tournament a few miles from one of the games venues in South Korea, three months after the International Olympics Committee recognized competitive computer gaming as a sport. The prize money of $150,000 is actually more than most gold medal athletes will make from bonuses from their home country.
eSports is a fast-growing trend that’s already opening up opportunities to make money with more to come given the massive expected growth, extremely loyal fans and players and the participation of millennials and Gen Xers, two groups advertisers fall all over themselves to talk to.
One play is to invest in the developers that create and publish the games, and another is focusing on the leagues that are created as global competitions continue to grow. The makers of the video game consoles will also stand to benefit as more gamers get involved, not to mention the companies that stream competitions to all of those fans around the world.
We’ve had great success so far in a few of those, including 35% gains last fall in Take-Two Interactive Software (TTWO). That was in my NexGen Trader service, and we made those profits in less than three months. We bought in after selling in tech had brought the stock down to both price support and its 50-day moving average. It was a great set-up for a move higher, and after a brief consolidation around our buy price, the stock turned higher.
In my NexGen Investor service, I currently recommend two stocks that benefit from the eSports trend. One is a dominant Chinese gaming company that happens to be one of my favorite long-term holdings. We’re already up 50% – even with the recent selling in the market – and I see more upside as this company benefits from exposure to industries such as social media, eSports, e-commerce and the booming Asian middle class.
The other is also an Asian company that is making a strong comeback, thanks in part to its new consoles. It just reported its best fiscal third quarter in eight years, and management raised sales guidance for the new consoles as well as their full-year outlook for the company. The stock is positioned perfectly to take advantage of the next wave of money coming into the gaming sector, and I expect our 11.5% gains to grow to nearly 30% in the coming months.
These are just our first profits coming from the burgeoning world of eSports. It’s a NexGen theme that is firmly on my radar, and it should be on yours, too.
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