The VanEck Video Gaming and eSports ETF (ESPO) is at a fascinating crossroads. I can see it in the charts, including the daily view shown below.
Let’s face it, in this market, beggars can’t be choosy. So when I run through my main list of about 75 ETFs I track closely, I’m begging for something that I can buy on the long side. That is, beyond a swing trading time frame.
I keep coming up empty. And the market keeps rewarding that negativity and patience. But I keep looking. And these days, the most intriguing situations are those which look so bad, they might soon be good. Like ESPO. Let me show you why.
It is attempting to bottom out, as are many industry and thematic ETFs. But according to the industry buzz, there are two different stories. One of short-term pain and another of massive, long-term structural shifts.
Despite the shaky price action, industry tailwinds are making a lot of noise. A massive driver of this is Saudi Arabia’s multibillion-dollar commitment to esports. The country is effectively trying to become the global leader in gaming by 2030, which is injecting significant capital into the ecosystem.
Furthermore, the narrative has shifted from building AI chips to adopting AI. In gaming, this means AI-generated environments and smarter non-player characters (NPCs), which analysts believe will drastically lower development costs for companies in the space.
However, as with many ETFs I cover here, ESPO is top heavy. It only holds about 25 stocks, and the top 10 make up roughly 60% of the fund. Here’s a quick look.
There is also a currency factor: Only about 35% of the holdings are USD-denominated. With recent volatility in the Japanese yen and Hong Kong dollar, the ETF can lose value even if the stocks themselves stay flat.
And as shown in this table, it is not a cheap basket of stocks. More than 27x trailing earnings, which is no surprise given ESPO has nearly doubled in price the past 3 years.
How to Play ESPO
As with all investing decisions, it depends on who you are. The tough part is deciding as a DIY investor what you really want to focus on. Assuming you are OK with committing money to deeply out of favor ETFs, ESPO is worth a look.
The long-term growth story is intact, as esports audiences are growing rapidly. But the short-term valuation is pricey. It looks like a classic growth at a reasonable price (GARP) play that is waiting for a catalyst. Like a successful launch of major 2026 game titles or a stabilizing yen. Either could contribute to finally confirming that bottom.
Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob's written research, check out ETFYourself.com.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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