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#Bull Case
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Last edited 9 months ago

ESPO has been in a sustained uptrend since bottoming below $7.50 last November. The uptrend has stalled a little between $10 and $10.50, but has not been broken. If it sustains, it could be testing its all-time highs close to $13 within the next couple of years.

The fund has copious exposure to a number of names that have run hard this year, including NVidia, AMD, and game publishers like Nintendo, Activision Blizzard and Take-Two Interactive. Interestingly, the fund also has a reasonable weighting in Aristocrat, a position that seems to have been added on relatively recently - probably the only ASX-listed name to feature.

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#Bear Case
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Added one year ago

AFR has a good article on this topic (paywall removed).

Very interesting comments from the fellow interviewed that states the growth of esports is unparrelled across sports products. And that ETFs cannot capture this upside:

"In an industry that was changing week to week with hot brands and high-performing gaming teams winning and losing in real time, the exposure to 30 stocks in a slow-moving index was never going to capture the upside that Larcombe knew was there.

“You need to be long and short and be really active,” he says.

Spurred on by the quiet demand from family offices keen for exposure to high growth and high-return investments, Larcombe started the PAC Global Esports Fund four years ago."

So the trend is real. But the access may not be worth it via an ETF.

Or perhaps it is an advertisement for his private fund.


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#Business Model/Strategy
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Added 3 years ago

It is becoming more accepted that everyone should hold a couple of ETFs in their portfolio. The reasons vary; maybe its core and satellite portfolio method, maybe it’s a lack of share market knowledge, maybe you know shares, but don’t have the time. The ASX is very small, and there is an argument for international exposure in every Aussie’s share portfolio. ETFs offer international exposure with no complexities for your tax or broker.

ASX:ESPO is an ETF. It seeks to track the MVIS Global Video Gaming & eSports Index. Its investment style is replication, and therefore a passive ETF. It is also considered theme based – as the companies in the index must be large and liquid listed companies that generate at least 50% of their revenues from video gaming and/or eSports.

ESPO holdings include companies from; USA, France, Korea, Japan, and others.

It charges you a management fee of 0.55%, or $5.50 for every $1000 invested. This is higher than an ASX200 or ASX300 ETF (such as ASX:A200 which is 0.07% or $0.70 fee for every $1000 invested). You need to decide if this is too high for the theme, being a passive ETF, and how it fits into the rest of your portfolio.

VanEck’s is the firm that operates the ETF. They were founded in the USA in 1955, and commenced operations in Australia in 2013.

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#History
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Added 3 years ago

It can be challenging to reconstruct your notion of an athlete to consider a gamer with his or her fingers wriggling across a controller, but esports are forcing us to rethink traditional sports at a growing rate. Like other organized sports, these players have sponsors, coaches, teams, and practice schedules. They train hard and create cutting-edge strategies. They suffer upsets and enjoy exhilarating wins.

eSports used to be LAN parties. Friends would bring their computers to each other’s houses, connect them up (on the LAN, or local area network) and play games whilst fuelling themselves with junk food.

Then came dial-up internet. You no longer had to move your computer to your friend’s house, you just dialled into each other over the internet – again playing all night long, fuelled on junk food.

Then came broadband. The same, but faster. Better games, better graphics, still lots of junk food.

Then came actual paid tournaments. Some of the earliest were games called Counterstrike and Starcraft. (watch a few minutes of each – notice the age of the computers, but also the lack of corporate slickness, but feel the love for the game).

Today it has only grown from there – this is what tournaments are today: The International - Dota 2 Championships – up to a $30 million prize pool.

eSports is now a business with revenues. The video game and e-Sports sector has grown into a bona fide industry. The ecosystem consists of game studios, developers, testers, marketers, distributors, and players. Also companies that build specialized hardware, gaming systems, equipment, peripheral devices, and even gaming chairs. Then there are platforms like Steam and Origin that allow you to buy and play licensed games, as well as platforms like Twitch that allow professional gamers to monetize their skills and the audiences that value them.

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#Business Model/Strategy
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Added 3 years ago

Let me start by outing myself. I like the idea of ETF’s. Strangely I hold none in my real portfolio and only this one in Strawman.

Index ETF’s do just that. Follow the index, thematic ETF’s like this one follows an idea. Now I am old and don’t get e-Sports or the idea that watching them could be a good use of time. But who am I to say, this shit is HUGE.

So, I used the ETF to trend follow something I am not exactly behind but many others are. Make sense?

What I also liked about the ETF were the holdings. Not e-Sport specific in many ways. Some are large brands that are actually hard to hold as individual holdings due to their listing home. The top 25 holdings account for over 60% of the ETF and include brands such as:

·      NVIDIA CORP  

·      TENCENT HOLDINGS LTD        

·      ADVANCED MICRO DEVICES INC        

·      NINTENDO CO LTD      

·      ACTIVISION BLIZZARD INC      

·      ELECTRONIC ARTS INC

I’ve taken only a relatively small holding, but if the trend continues and the managers are half decent in following the trend, I will likely add more.

Caveat for any ETF is to check the management fees. In the case of ESPO from VanEck it is 0.55% not terrible, but again it’s not an index tracer either meaning some intelligence needs to be funded.

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