5 Best Performing Gaming Stocks Record Average ROI of 101% YTD

5 Best Performing Gaming Stocks Record Average ROI of 101% YTD

The gaming industry has witnessed unprecedented growth this year sparked by a range of factors like technological advancement and the health crisis. The growth can be witnessed in the positive Return on Investment (ROI) by some of the leading companies.

Data presented by Buy Shares indicates that the five best-performing gaming stocks have recorded an average ROI of 101.33% on a Year-to-Date (YTD) basis. The data indicate that Singapore based online game developer Sea Limited is the highest gainer with a massive ROI of 286.27%.

The Sea Limited ROI is almost three times higher compared to second-placed China’s gaming franchise Bilibili at 99.52%. Out if the sampled companies, Chinese based entertainment giant Tencent Holdings recorded the fifth-highest ROI at 35.05%.

Gaming stock prices surge amid pandemic

Return on Investment (ROI) is a performance metric used to evaluate the efficiency of an investment or sometimes compare the efficiency of several different investments. The measure attempts to directly measure the amount of return on a particular investment, relative to the investment value. The ROI for the sampled video game stocks involves companies that deal with the development, marketing, and sale of video game hardware and software.

From the data, investment in the industry has had positive returns this year mainly due to the coronavirus pandemic. In the course of the health crisis, lockdowns were imposed forcing many people to stay at home limiting entertainment options. Video games became one of the go-to entertainment options for consumers staying at home.

In the wake of the pandemic back in March, gaming stocks slightly slumped with the rest of the market but fortunes turned around. However, the steady surge in gaming stock prices has raised some concerns among investors. The main question is whether the stocks will end the year on a high as the rest of the stock market continues to recover from the pandemic.

Most importantly, the strength in gaming stocks witnessed this year is more than a near term happening. A rush in technological breakthroughs has sparked more growth in the gaming industry.

Technology to spur gaming stocks growth

The breakthrough includes 5G advancement. The network will spur video game streaming services. The improvements in virtual reality technology, mostly due to 5G deployment, will enable every console and mobile game to include AR/VR capability.  Additionally, cloud gaming will play a key role in the sector’s growth. Cloud gaming eliminates the need for hardware, or any installation, or any cables.

A combination of these technologies is bound to increase the number of consumers interested in gaming, increase the number of time consumers spend gaming, and also increase how much revenue and profit video game companies earn from gamers.

Apart from technological advancement, the video game industry is undergoing profound changes in business models. For example microtransactions, subscriptions, and esports are an increasing part of the industry.

Gaming stocks continue to remain attractive for many investors as the sector shifts towards higher margins. Most companies can generate revenue all year round. In the past, most gaming companies used to rely on big releases to get them through the year. The ability to distribute games in a digital form has helped companies cut on costs and maximizing revenues.

In a snapshot, the gaming industry is a large and fast-growing market that holds a lot of growth potential. Companies can adapt to and shaping consumers’ demands for interactive electronic entertainment will deliver good returns for shareholders and investors. Like other industries, gaming stocks also face unexpected risks that might impact share prices. However, there is a great chance that global demand for games will continue to grow.  For investors, the potential means that they can add gaming stocks to their portfolios.

The growth of smartphones will also likely attract more players in the gaming industry. Notably, Amazon has shown intent to introduce more products in the sector. The entry of such players is expected to spark competition for consumers.