One of the big ideas for Ark Invest is the continuation of video games having end-to-end virtual entertainment. Gaming fits into the ETF management company’s thesis that time spent on games and digital goods could continue.
Here are the two gaming-related companies that are owned by Ark Invest in the ETFs and why the company sees them as the way to play the sector.
What Happened: Ark Invest CEO Cathie Wood shared a thesis on investing in gaming companies Roblox Corp (NYSE: RBLX) and Unity Software (NYSE: U) in previous interviews and write-ups.
Ark portfolio manager Nick Grous added more details and gave an update to Benzinga as to why these two gaming-related stocks are the big bets Ark Invest is placing on the sector.
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“If you look at the solution that Roblox offers, Roblox isn’t necessarily a video game publisher, it’s actually a video game platform,” Grous said.
The Ark Invest portfolio manager added vertical integration for a company such as Roblox is important when considering investments in the gaming space. Grous said Roblox is probably more similar to YouTube than it is to other video game publishers.
Like Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL)-owned YouTube, Roblox has user-generated experiences that drive the content, Grous said.
As an example, Grous highlighted within a week of “Squid Game” going viral on streaming platform Netflix Inc (NASDAQ: NFLX), people were playing games like “Red Light, Green Light” from the show within Roblox.
Grous said this was similar to popular YouTuber Mr. Beast creating a real-life version of “Squid Game” that saw huge traffic on YouTube.
“That’s the similarity between Roblox and YouTube.”
Grous said content from other platforms and genres helps keep engagement “extremely high” on Roblox.
The other gaming-related company owned by Ark is Unity Software.
“We look at Unity as a platform. We look at it as not just a game engine, but used for other sectors.”
Grous said Unity will continue to see use cases in other sectors. The company operating as a platform lends itself to an often-used Ark Invest case of investing in platform companies.
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Why It’s Important: The different experiences offered by Roblox could set the company apart in the gaming space, Grous said. Roblox is creating more virtual experiences and hang-outs, as well as diversifying away from traditional gaming.
The company attracted the likes of Nike Inc (NYSE: NKE), the National Football League and Dave & Buster’s Entertainment Inc (NASDAQ: PLAY) to partner on spaces within the Roblox virtual world.
“We’re seeing a new market open up with socialized gaming,” Grous said.
Grous said companies such as Roblox and Fortnite have shown their leads in the socialized gaming space with virtual hang-outs and concerts.
“When you have user-generated content, it lends itself to more socialized gaming.”
Grous said user-generated intellectual property can fight off the hit-driven nature of the gaming space. Intellectual property in the gaming space was previously very sticky, Grous said.
The Ark Invest portfolio manager said the top games on video game streaming site Twitch are Grand Theft Auto and League of Legends, both of which came out in the late 2000s but are still capturing strong timeshare.
“When you get it right, it lasts for a very long time.”
Roblox is held three of the Ark Invest ETFs, with the current holdings listed below:
Ark Innovation ETF (NYSE: ARKK): 17th largest holding, $215.9 million, 2.96% of assets
Ark Next Generation Internet ETF (NYSE: ARKW): 13th largest holding, $42.5 million, 3.54% of assets
Ark Fintech Innovation ETF (NYSE: ARKF): 22nd largest holding, $10.9 million, 1.27% of assets
Unity is found in four of the Ark Invest ETFs, with the current holdings listed below:
Ark Innovation ETF: 11th largest holding, $281.4 million, 3.85% of assets
Ark Next Generation Internet ETF: 12th largest holding, $43.6 million, 3.64% of assets
Ark Autonomous Technology & Robotics ETF (BATS: ARKQ): 19th largest holding, $15.9 million, 1.71 % of assets
Ark Space Exploration & Innovation ETF (BATS: ARKX): 25th largest holding, $4.1 million, 1.48% of assets
RBLX, U Price Action: At market close Monday, Roblox shares traded at $34.43 versus a 52-week range of $21.65 to $73.71. Shares are down over 50% in the last year.
Unity shares traded at $37.46 versus a 52-week range of $21.22 to $114.15. Shares are down over 65% in the last year.
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This article EXCLUSIVE: Why Roblox Is A Key Portfolio Holding For Ark Invest And How It’s Similar To YouTube, MrBeast originally appeared on Benzinga.com