Video Game Investment Watch ~ April, 2015

stock chartThe stock market in general is struggling right now, which means a good time to buy might be coming. Even the high-flying Electronic Arts has been “basing” in recent weeks with the lukewarm reception of Battlefield:Hardline.

The future of video games has never been brighter, and the stocks of video game companies are reflecting that. Blizzard is up about 20% in the last year. EA is up about 60%. Sony is up 50% in just the last 3 months, after getting sold off due to the hacking scandal.

If you’re a gamer, you’re probably good with figuring addition math. It doesn’t take an Eve Online player to look at these numbers and think this might be worth looking into, especially if you’re a young person.

It takes scarcely a few hours of your time to set up an account with an online broker and transfer money from your bank account (Or at least, it should. If it doesn’t, find another one.) I’m endorsing TD Ameritrade.

(I can also refer you if you want to go to the trouble to help me win a $50 referral bonus in exchange for this blog post – just leave a comment with your first and last name, and I’ll get your email address to complete the invitation, but no one else will).

I haven’t killed the research on this. I’m mainly typing research notes from this week.

Blizzard (symbol: ATVI)

Blizzard’s stock has given a healthy 20% return in the last year, but has gone nowhere for the last eight months. This year Activision has the new Call of Duty:Black Ops coming, along with the new online Guitar Hero Live next fall. Blizzard is working on Heroes of the Storm (in beta), which is getting mixed reviews.

If it’s successful, it could be really big, and since when has a Blizzard game not been successful?

Blizzard may also have a “catalyst” for its stock coming in the form of another game announcement. Is everyone from the cancelled Titan project securely re-distributed to Overwatch and elsewhere, or is something more in the works? This could send the stock breaking out.

I’m really tempted to buy some ATVI, even though I’m personally not a huge Blizzard fan. Blizzard is looking really strong with its games on Twitch, maybe with a stronger popular sentiment than the market is discounting right now.

Electronic Arts (symbol: EA)

They’ve got FIFA, Madden, NBA, Sims, Need for Speed, Dragon Age, and SWTOR. Electronic Arts has returned an astonishing 60% on an investment in the last year.

In recent weeks, like Blizzard, EA stock has been basing, which means it may be poised to offer a good buying opportunity, either by breaking out to the upside, or also by breaking down. The chart could definitely break down.

EA seems like the best bet on the future of RPGs with Bioware in the house. Its big upcoming title looks like Star Wars: Battlefront, launching with the new Star Wars movie from Disney next winter. It looks like a new Mirror’s Edge is coming as well.

I struggle ethically to invest in EA because they’ve built their profits and soaring stock price on the back of microtransactions that I hate. I haven’t purchased Dragon Age: Inquisition yet because EA will only sell it on Origin and not Steam.

This is because they’d rather pocket the profits themselves and more importantly force customers into their platform instead of giving them a choice. I use Steam on PC, so I’m not buying any EA games. Origin is literally the only reason I never look to buy EA games, because I look on Steam. It’s my Facebook for video games.

Still. EA is the king, and it’s often the best play to put your chips on the king, especially when the stock market is struggling, like it is this year.

My Picks: Nvidia And Akamai (symbol: NVDA and symbol: AKAM)

I bought into Nvidia and Akamai this week. Like Steam (Valve), I like companies who are independent fighters and not greedy giants. I’m so wary to bet on software companies also, for all sorts of reasons. In general, the short history of tech shows that software gets replaced with better technology (i.e. cloud, Android, and open source.)

Meanwhile, many gaming companies are private or on a foreign market. You can’t buy into Zenimax. You can’t buy a video game ETF–yet. (An ETF is an exchange-traded fund, a “stock basket” containing a bunch of stocks on a common theme, which reduces your risk drastically for any single stock. You can buy these just like a stock at any broker, and some you can buy into for free.)

NVIDIA: Currently the PC market is in a decline, and few think it will recover soon, if ever. Microsoft and Intel are really suffering because of this, and it shows in their stock prices. This is a good time to go with a contrarian strategy on PCs–buying when everyone else has sold.

NVIDIA has catalysts not just in the video game industry, but also through a new major initiative with Dell against Apple. The release of DirectX 12 this summer may also be a catalyst. Most of Dx12 will be supported as a software upgrade for existing cards, but some features will need a new video card. These are likely the high-performance features that gamers are most interested in.

AMD is also a solid contrarian play. They have been mostly beaten by Intel in the CPU chips, but are hanging on with their graphics cards. Their stock has been crushed with their failures. On the other hand, I was willing to spend more to get an Intel CPU on my last gaming computer, but I tried to scrimp with a Radeon card. That was a mistake.

My installation of the AMD Catalyst Control Center has been broken forever and won’t run, just like on my last PC. I have no way to adjust or troubleshoot my card. My card also has display issues and glitches with two screens, so I don’t run two screens anymore. The fan also has had problems, but I think that’s the third-party manufacturer. Next time it will be Intel and Nvidia, only.

AKAMAI: Akamai is one of the world’s largest online content delivery services, and a cloud services provider. They advertise themselves as a game content deliverer, and they’ve had some success in recent years in delivering content for gaming companies like Turbine, Nintendo, and Sony. They have recently worked on being a security provider.

Akamai is a bit of a “greedy giant”. They have waged legal war on competitors, and in at least one case (Limelight Networks), they have failed. Limelight is another opportunity, and this much smaller company has had big insider buying in the last quarter even after the stock has surged, which is supposed to be a big buy signal.

I bought $200 of Akamai originally for $2 a share in the market crash of 2001. I sold half at $20, and the rest at $40. So this stock is a long-time favorite. I’m starting to buy in again at $70 after a base, although I’m really tempted to try for the same rags to riches story with Limelight.

Akamai’s stock chart is a stair-step show-me pattern. When they report solid earnings, everyone buys, otherwise everyone is wary. This is partly because Akamai has done business with Apple, who is currently the world’s greatest tech company by doing chips themselves and cutting out Intel and Nvidia from the equation. Apple is currently working on reducing the need for Akamai, which is bad.

As of recent weeks, Apple is still going to their major competitor, Samsung, for displays, though. Go figure.

On the positive side, Akamai specializes in cloud and delivering video, both of which are huge future growth areas. I’m also not a big believer in the current hot, overpriced internet security companies. From what I’m reading, I think big companies would rather go for a security solution as part of the package from their content delivery or networking partner, who is the expert on their own systems.

My Strategy

So what’s my buying strategy? Right now I’m averaging in. I’ll buy a little, preferably on “dips” in the market, over time. I always sell if a stock loses 7%. It’s my rule. That way, all I need is to pick and hold one double (+100%) to make up for maybe 12 losses adjusted for fees. Surely even a stupid kitty can handle that.

So if you love video games, consider putting your money where your joystick is. Don’t make my mistake and wait. If your favorite company does well, you profit, and you’re basically getting your games for free, instead of having your money sitting in a worthless bank account.

If you don’t profit, this blog post was in no way an endorsement of any of these companies, or professional advice.

Good luck, and don’t forget to buy -and- hold until the 7% rule is broken. I got the 7% rule from the classic book title shown below by William Neil. Here are a few golden rules from that book, rules that I failed to follow when I first tried managing my own portfolio years ago:

Buy on the way up, not the way down. Buy more only after the stock has risen.

Buy when stocks are near high, not when they look cheap.

Always sell quickly for 7-8% loss.

Learn to read charts.

More Reading:

How To Make Money In Stocks – William J. Neil (Can’t link to Amazon on this free hosting. Enjoy.)


About Silverangel View all posts by Silverangel

2 responses to “Video Game Investment Watch ~ April, 2015

  • Nimuera

    That’s a cool advice! My husband always wants me to read stockmarkets instead of playing WoW, maybe that is the way to get me doing it! 🙂

    • Silverangel

      Haha. 🙂 Watching the stock market daily, especially if you’re looking to buy or sell, does have a bit of the same addiction as watching the in-game auction house. It’s a lot more complicated with higher stakes though, and takes some homework.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: