Activision (NASDAQ: AYVI) Continues To Answer Call of Duty

It’s not an ETF that’s been traditionally mentioned as a benchmark with which to compare performance against the S&P 500 index, but it’s one that’s sure to become more and more commonplace in the years ahead. The VanEck Vectors Video Gaming and eSports ETF (NASDAQ: ESPO) was outperforming the S&P coming into the coronavirus pandemic and it’s still outperforming it as we start to come out the other side too.

Since its public listing in October 2018, it’s climbed 65% compared to the S&P’s 10% growth over the same period. What’s especially interesting though is that, much like tech giants Apple (NASDAQ: AAPL) or e-commerce giants Amazon (NASDAQ: AMZN), it had undone all of the selling from February and March by the middle of April. To be fair, it doesn’t take a rocket scientist to figure out why and how it bounced back so strong.

Impressive Strength

With businesses shuttered and millions locked down at home, one of the few things that remained constant during the first wave of the pandemic was the nation’s wifi signal. Online player numbers surged almost immediately and helped give March its best video game sales numbers in twelve years which were up a full 35% from March 2019.

Understandably, ESPO has been punching up to new highs on a weekly basis since then and is up 30% for 2020 so far and 51% from the depths of March alone. It’s clearly getting the right kind of attention from the big names on Wall Street who are banking on continued growth in the video game and esports space.

That being said, ETFs are great for helping individual investors to diversify across a basket of stocks and to mitigate the risk of any one of them collapsing, but many investors like to back a single horse. When it comes to choosing one from this basket, investors aren’t stuck for choice. However, one stock, in particular, has been shining brightly of late and is worth a closer look.

Industry Leader

At 6.3%, Activision Blizzard (NASDAQ: ATVI) is the fourth largest component of the ESPO ETF and the biggest video games specific name of the bunch. Based on their market position, they’re well worth their place in the list. Activision has been at the forefront of the growth in esports over the past ten years and in many has helped to shape how the industry exists today.

They own the Call of Duty and StarCraft franchises which are two of the most popular games right now and have gone so far as to acquire the Major League Gaming esports organization in 2015. They’ve also partnered with Disney(NYSE: DIS) to stream Overwatch League games on Disney and ESPN cable channels and have another multi-year deal with Google (NASDAQ: GOOGL) to stream esport games on Youtube.

The company’s Q1 earnings at the start of May gave investors a peek into how the internal engine is performing. The results smashed analyst expectations, with a 20% year on year jump in net bookings catching plenty of attention. Shares had already recovered from the coronavirus driven selling and were back above pre-COVID levels when these results hit, but that didn’t stop investors from continuing to flood in on the long side. By the close of Wednesday’s session, they were up a full 50% from March’s low.

Good Momentum

It looks like this kind of momentum will be continuing for a while yet, with last week’s report of video game sales in May confirming a third straight month of year on year gains. The cherry on top for investors was Activision’s Call of Duty: Modern Warfare game reclaiming the coveted #1 position in the dollar sales chart.

What’s plain to see from recent weeks is that in esports and video games, investors have an industry that has proven its robustness in the face of an awe-inspiring market crash and in Activision, a stock that looks hungry for road and can move fast. Don’t expect either to hang around forever.