Is NERD A Better Investment Than The S&P 500 Right Now?

Video gaming and esports are getting bigger and bigger by the year, with COVID-19 only increasing the sector’s growth as people look for things to do.

Oct. 19, 2020

Many people see the potential going forward of esports and the video game sector. However, it can be difficult to know what companies to invest in. NERD (NYSEARCA: NERD) is an ETF of numerous companies that are actively involved in the video game industry.

Better than the S&P 500?

NERD is the first index that has properly been able to track the performance of esports, launching in mid-2019. 

This includes video game publishers, hardware companies, owners of competitive esports teams, owners/operators of video game leagues and tournaments, as well as operators of streaming networks. Some of the biggest holdings currently include Tencent Holdings, Activision Blizzard, HUYA, and Corsair Gaming

As of October 15, the median market cap for NERD is $3.9 billion, with its price trading slightly above net asset value around $25. Over the past year, it has seen its price rise by almost 36%, doubling since pandemic-driven March lows. 

Similarly, the S&P 500 had a significant dip when the pandemic hit, but it has gradually worked its way back up and is now almost 3% greater than what it was pre-pandemic. 

How are growth and potential?

The world of esports is getting exponentially bigger by the year, with global esports audiences estimated to bypass 648 million by 2023.

NERD only started in mid-2019, so there is not much of a historical record to look back at, while its performance was pretty flat until the pandemic hit. With people waking up to the massive potential of esports, it is clear that investors have been looking at ways to get money into the sector in its relative infancy. 

As time goes on, it looks like NERD is poised for strong growth. It stands out from the crowd as the go-to way to get a balanced exposure to the industry. When the idea of esports becomes more mainstream, there is a lot of potential for significant growth in NERD.

Video game publishers have been hitting record engagement and sales figures in 2020, including the likes of Electronic Arts, Activision Blizzard, and Take-Two Interactive. In August 2020, U.S. video game spending rose to a record of $3.3 billion, an increase of 37% year-on-year. Total spend so far in 2020 is $29.4 billion, a 23% rise from the same period last year.

There are also new console releases coming before holidays from Microsoft and Sony that will provide further boosts to spending figures. 

Which is better right now?

For many years, investing in the S&P 500 index has been a simple, but effective strategy. The index has trended upwards historically, albeit having major blips now and again. With the second wave of COVID-19 seemingly on the horizon as the winter sets in and a U.S. election coming in November, it looks like it will be a bumpy time for the S&P 500.

In contrast, the onset of another wave of lockdowns would likely improve the fortunes of video game stakeholders even further. People will be buying new consoles and games as the holiday season approaches, as well as watching and getting involved with esports on an even deeper level. With a lot of growth potential going forward in the long-term, NERD looks to be the better investment right now.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.