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Holiday Season to Boost Video Game Sales: 4 Funds to Play

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While the coronavirus pandemic continues to devastate the global economy, the gaming industry has been one of the beneficiaries. With people forced to stay indoors, there is increasing demand for entertainment, with gaming being one area. In the past few months, the gaming space has witnessed title downloads and streaming practices across the globe.

With the holiday season right around the corner, the gaming sector is sure to witness record sales. Per NPD’s forecasts, U.S. consumer spending on video games is projected to reach $13.4 billion this year’s holiday period (combined November and December), which suggests a 24% increase from the previous year. At present, nearly 244 million people in the United States play video game, which is a jump of 32 million people since 2018, per the NPD group study.

According to the aforementioned group’s 2020 Gamer Segmentation Report, 65% of gamers used more than one device to play video game compared to 59% in 2018. Video game device providers are putting their best foot forward to make the most of the holiday season. In fact, many buyers look forward to the Black Friday gaming deals on accessories like headsets and hard drives along with PS Plus deals, Xbox Game Pass or Xbox Live deals.

With two next-gen consoles scheduled for release this year, the NPD expects that Nintendo Switch will top the list this holiday season. Nintendo’s latest high-performance specs make the Switch a lot more attractive option, making it difficult for competitors like Xbox Series X and PlayStation 5 (also scheduled for release this holiday season). Along with that, it has some successful releases this year such as Paper Mario: The Origami King, Pokémon Sword & Shield and the extremely popular Animal Crossing: New Horizons, which broke Switch sales records.

With new cases of coronavirus picking up again, people are expecting limitations on outdoor activities like theme parks, amusement parks or travels. Thus, they can now spend more on indoor entertainment, which in this case is new consoles, new tickets for more content, in-app or in-game purchases and streaming services. In fact, technology giant Microsoft, which reported first-quarter fiscal 2021 earnings on Oct 27, reported a solid quarter as the pandemic drove demand for its cloud and video game businesses. Microsoft’s personal computing revenue was up 6% from the year-ago period to $11.85 billion, thanks to increased sales of Xbox and Microsoft Surface devices.

Our Fund Picks

Given the strong prospects of gaming companies this holiday season, we have selected four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Communication Services Portfolio (FBMPX - Free Report) aims for capital appreciation. The fund invests majority of its assets in companies engaged in the development, production, or distribution of communication services. FBMPX is a non-diversified fund and has returned 14.5% and 13.3% in the past three and five years, respectively.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FBMPX has an annual expense ratio of 0.78%, which is below the category average of 1.16%. The fund has no minimum initial investment. Some of the fund’s top gaming stock holdings are Zynga and Activision Blizzard.

Franklin DynaTech Fund Class A (FKDNX - Free Report) aims for capital appreciation. The fund invests in common stocks of companies that the fund manager believes are leaders in innovation, take advantage of new technologies, have superior management, and benefit from new industry conditions in the dynamically changing global economy. FKDNX has returned 26.5% and 24.1% in the past three and five years, respectively.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FKDNX has an annual expense ratio of 0.86%, which is below the category average of 1.05%. The fund has a minimum initial investment of $500. Some of the fund’s top gaming stock holdings are Tencent Holdings and Facebook.

Fidelity Select Technology Portfolio (FSPTX - Free Report) aims for capital appreciation. The fund invests primarily in equity securities, especially common stocks of companies that are engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements. FSPTX is a non-diversified fund and has returned 27.4% and 29.3% in the past three and five years, respectively.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSPTX has an annual expense ratio of 0.71%, which is below the category average of 1.25%. The fund has no minimum initial investment. Some of the fund’s top gaming stock holdings are Microsoft and Facebook.

T. Rowe Price Global Technology Fund (PRGTX - Free Report) aims for long-term capital growth. The fund invests most of its assets in the common stocks of companies that its managers expect will generate the majority of their revenues from the development, advancement and use of technology. PRGTX is a non-diversified fund and has returned 23.3% and 26.1% in the past three and five years, respectively.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRGTX has an annual expense ratio of 0.88%, which is below the category average of 1.25%. The fund has a minimum initial investment of $2,500. Some of the fund’s top gaming stock holdings are Microsoft and Tencent Holdings.

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