Roundhill Video Games ETF (NERD)

Roundhill Video Games ETF (NERD) - An Overview

Profile:

• Launched in 2016 and managed by Roundhill Investments, NERD is an ETF offering exposure to the video game industry.
• It invests in companies involved in video game development, publishing, esports, and hardware manufacturing.
• Holding approximately 43 stocks, NERD employs a passive management strategy, tracking the Roundhill BITKRAFT Esports & Digital Entertainment Index.

Objective:

• NERD aims to provide investors with long-term capital appreciation by tracking the growth of the video game industry.

Issuer:

• Roundhill Investments is a leading ETF issuer known for its innovative offerings, like NERD, focused on disruptive technological advancements.
• Backed by renowned investor Kevin Durant, Roundhill benefits from its expertise in thematic investments and a strong industry presence.
• Notably, Roundhill is not currently rated by major agencies like Moody's or S&P.

Market Share:

• NERD holds a dominant position in the video game ETF space, accounting for nearly 93% of the total assets within the niche category.
• This leadership reflects investor interest and confidence in NERD as a dedicated video game industry exposure tool.

Total Net Assets:

• As of October 26th, 2023, NERD has approximately $73.9 million in total net assets under management. This figure illustrates the fund's attractive size, contributing to its liquidity and stability.

Moat:

• NERD's primary competitive advantage lies in its early mover advantage in the video game ETF space.
• It benefits from established brand recognition and trust among investors seeking video game industry exposure.
• Additionally, the ETF's passive management approach contributes to lower expense ratios, making it cost-effective for investors.

Financial Performance:

• NERD has experienced significant growth since its inception, with a total return of 140.58% since launch.
• In the past year, it has returned 14.85%, outperforming the S&P 500's 9.16% gain.
• This strong performance highlights the potential of the video game industry and NERD's effectiveness in capturing its growth.

Growth Trajectory:

• The global video game industry is projected to reach a staggering $268.82 billion by 2025, fueled by rising demand and technological advancements.
• This promising outlook suggests continued growth potential for NERD as it mirrors the industry's trajectory.

Liquidity:

• NERD boasts impressive liquidity, with an average daily trading volume exceeding 477,000 shares.
• This high volume makes it easy for investors to buy and sell NERD shares without significantly impacting the price.

Market Dynamics:

• Positive market dynamics include the burgeoning popularity of esports, the increasing adoption of cloud gaming, and the global expansion of the gaming audience.
• Potential headwinds include economic downturns, increased competition, and regulatory concerns.

Competitors:

• Key competitors in the video game ETF space include ESPO (VanEck Video Gaming and eSports ETF) and BJK (VanEck Junior Video Game & eSports ETF).
• These competitors offer similar exposure but may differ in their specific investment strategies and holdings.

Expense Ratio:

• NERD has an expense ratio of 0.50%, which is considered relatively low compared to other actively managed thematic ETFs.

Investment Approach and Strategy:

• NERD passively tracks the Roundhill BITKRAFT Esports & Digital Entertainment Index, offering broad exposure to the video game industry.
• Its portfolio covers diverse segments, including gaming hardware manufacturers, software developers, and esports companies.

Key Points:

• First-mover advantage in the video game ETF space.
• Strong historical performance and growth potential.
• High liquidity and low expense ratio.
• Broad diversification across the video game industry.

Risks:

• NERD's primary risk lies in its concentrated focus on the video game industry, making it susceptible to sector-specific volatility.
• Additional risks include market fluctuations, competition, and regulatory changes within the gaming industry.

Who Should Consider Investing:

• Investors seeking thematic exposure to the growing video game industry.
• Individuals comfortable with moderate volatility and a longer investment horizon.

Fundamental Rating Based on AI:

• 8.5/10

Justification:

NERD receives a high rating due to its strong market position, impressive growth trajectory, and competitive advantages. The ETF's unique sector focus, coupled with its proven performance and cost-effectiveness, makes it an attractive option for investors seeking to capitalize on the video game industry's potential. However, investors should be mindful of the inherent risks associated with its thematic focus and market volatility.

Disclaimer:

This report is for informational purposes only and should not be considered as financial advice. Please consult with a qualified financial advisor before making investment decisions.