M&G INVESTMENT is just as confident about video game stocks as it was six months ago, even amid the rotation into value equities.
Vikas Pershad, a Singapore-based portfolio manager at the firm, said the video gaming industry will keep growing. Players shifting from physical media to internet downloads will boost software sales and margins, as well as increase user engagement, he said.
Pershad’s Asian equities team at M&G, which oversees around $20 billion in assets, has been adding video game stocks -- some of the most prominent trades during the pandemic -- in recent months.
"This theme is not done -- it’s going to be around for long time,” said Pershad, who expects "console excitement” will be "justified” in the next five years.
The coronavirus pandemic fueled a rally in gaming stocks as people were stuck indoors during lockdowns. Japan’s Nintendo Co. has rallied 76% since its March-trough, while Sony Corp., which just started selling its new PlayStation 5 console in November, saw its share price surge to record highs last month.
Pershad says he has found opportunities along the console-hardware supply chain, as well as in game-content developers in Japan, Korea and China. He is also bullish on video-game-streaming companies, where Chinese names are leading the way.
Video games are just one example of the kind of growth stocks M&G remains bullish on, even as investors have started buying value shares.
An MSCI index for growth stocks in Asia outside Japan has beaten value peers by about one percentage point so far this week, poised to outperform on a weekly basis for the first time since the end of October.
Massive monetary support from global central banks and earnings that are underestimated by investors should continue to boost sectors like healthcare, technology and some pockets in financial services, despite the fact that their valuations have expanded, Pershad said.
"The past and the present, they rhyme, but they are not the same,” said Pershad. "Past valuation is less indicative of what they should be in the future, given central banks’ support.” - Reuters
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