The stunning rise in esports popularity reminds me of 2010s Facebook in the sense that, for the longest time, older generations and other non-users were aware that a growing segment of the populace was growing obsessed with it, but believed the trend was either irrelevant or a passing fad.
The growth in esports – essentially teams of video gamers playing against each other in front of a live and broadcast audience – has been undeniably explosive. CNBC reported that the finals of the League of Legends tournament held in South Korea in November attracted an audience of 100 million, only three million fewer than U.S viewers of the 2018 Super Bowl.
One of the teams in the League of Legends, Cloud9, is now valued at US$310-million by Forbes magazine after recently raising $50-million in financing. The nine teams across the world in the League of Nations have a combined worth of at least $100-million according to CNBC’s report.
Even if the viewer numbers for the finals are inflated, the League of Legends is only one organization. The Overwatch League, owned by game producer Activision Blizzard, is also growing rapidly with a city-based team format. Robert Kraft, owner of the NFL’s New England Patriots, recently paid $20-million to own the Boston franchise of the Overwatch League.
Despite having a similarly sized audience as NFL football, esports tournaments are not yet able to charge $5-million for 30 second advertisements like Super Bowl broadcasters can. But Mastercard Inc. recently signed a multi-year deal to become the global title sponsor of the League of Legends (the amount Mastercard paid was not disclosed).
Citi analysts recently cited studies indicating 143 million people watch esports at least once per month and another 192 million watched occasionally in 2017. The study estimates a 14-15 per cent compound annual growth rate in viewers for the foreseeable future. All told, revenue for esports is expected to grow at a 27.5 per cent annual pace to $1.4-billion by 2021.
Citi research included a list of companies set to benefit from the esports trend in their “Global Theme Book” for January which included NVIDIA Corp., Logitech International SA, Nintendo Co., Capcom Co. and Konami Holdings Corp. Morgan Stanley analyst Brian Nowak listed esports among the six trends driving profit growth for video game stocks. Mr. Nowak’s top picks in the broader gaming sector are Take Two Interactive Software Inc. and Zynga Inc.
Domestically, there are few investing options, although Cineplex is attempting to grow its esports exposure after acquiring WorldGaming, an online gaming platform, in 2015
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Iamgold Corp. (IMG-T). Iamgold Corp. shares have soared as the investment community turns its gaze to the $2.2-billion gold producer as a possible takeover target. With operations in Canada, Africa and South America, Iamgold has been a long-time laggard among Canadian intermediate gold producers and recently released a disappointing production forecast for the year. But the Toronto-based miner’s shares have risen strongly in the past week. Rachelle Younglai and Niall McGee report (for subscribers).
SNC-Lavalin Group Inc. (SNC-T). Any investors pouncing on the beaten-up shares of SNC-Lavalin Group Inc. in the hope that the Montreal-based engineering and construction company is going to be acquired at a nice premium should focus on what its stake in the 407 Express Toll Route might be worth. A rough estimate: It represents about $28.50 per share, according to analysts. That’s 76 per cent of SNC’s current share price, implying that the rest of SNC could be had for a song. David Berman takes a look at the stock (for subscribers).
The Rundown
This market isn’t as cheap as it appears to be
Stocks are considerably cheaper than they were a few months ago, but not as cheap as many optimists would like to think. Investors should keep this in mind as they contemplate how much to bet on the market rebound continuing. The bullish case focuses on how inexpensive stocks appear in comparison with their expected earnings per share over the next year. For instance, Canadian stocks are near their cheapest levels in five years if you look at what analysts are expecting over the next few months. This is indubitably comforting. So is precedent on Wall Street. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, says it is highly unusual for the S&P 500 to fall two years in a row. Ian McGugan reports (for subscribers).
The lesson for investors as WSP Global surpasses SNC-Lavalin as Canada’s top engineering firm
WSP Global Inc. has supplanted SNC-Lavalin Group Inc. as Canada’s top engineering firm – at least for now – making one thing very clear to investors: Emphasizing exposure to developed markets is the right approach when some of the more far-flung areas of the world are causing real headaches for Canadian companies and their shareholders. The Montreal-based engineering firm generates about 90 per cent of its net revenues – or revenues after subtracting costs related to sub-consultants – through work on buildings and infrastructure in countries that are members of the Organisation for Economic Co-operation and Development (OECD). In other words, we’re talking about jurisdictions such as Canada, the United States, Australia and Europe, where tyrants are confined to Twitter outbursts rather than corporate shenanigans. David Berman reports (for subscribers).
There are two ways dividend lovers can play Canadian Tire - and both are on sale right now
Here’s what John Heinzl has bought at Canadian Tire or one of its sister chains such as Mark’s or Sport Chek – in the past year: Five hockey sticks, one hockey helmet, multiple rolls of hockey tape, one set of windshield wiper blades, two parkas, one pair of binoculars, four furnace filters, one pair of swimming goggles, one inflatable air mattress, two fans and roughly six pairs of Nike or Adidas running shoes (my kids wear them out quickly). You’d think, based on these purchases alone, that Canadian Tire Corp. Ltd.’s shares would be soaring. Nope. The opposite. After posting a scorching five-year annualized total return of more than 19 per cent through the end of 2017, the stock lost 11 per cent last year. (All returns cited here include dividends.) It’s been a similar trajectory for Canadian Tire’s property arm, CT Real Estate Investment Trust. Even during banner year for REITs in 2018, when the sector was one of the market’s few winners, CT REIT’s total return was negative 16 per cent. So, has the Tire totally lost its tread? Is this the beginning of a long and nasty skid for the Canadian retailing icon? Hardly. If anything, the recent pullback may offer a good buying opportunity. John Heinzl explains his view (for subscribers).
Investors, beware: There may be some turbulence in store for the loonie
Street forecasts for credit markets paint a positive outlook for the loonie in 2019. But, in light of a recent series of weak domestic economic reports, investors may want to curb their expectations for the currency. Scott Barlow takes a look at the Canadian dollar’s high sensitivity to relative yields – the government of Canada two-year bond yield minus the two-year U.S. Treasury yield. The oil price still matters in determining the loonie’s value but over the past five years, correlation analysis indicates that yields have had a larger impact. Higher domestic bond yields relative to U.S. yields have served to support the Canadian dollar’s value. (For subscribers).
Read the Ninth annual Invest Like A Legend special in Report on Business Magazine. (For subscribers)
Others (for subscribers)
‘Why investors suck at selling stocks’
Oil faces uphill struggle as shale, growth risks challenge OPEC cuts
TSX Composite earnings scorecard: How fourth-quarter results have fared
A strategy for investors still wary of market volatility
Think twice about paying the hefty premium for these 14 TSX stocks
Luxury stocks may yet lose luster despite China’s taste for Vuitton
Thursday’s Insider Report: Chairman dumps this blue-chip stock, cashing out over US$700,000
Thursday’s analyst upgrades and downgrades
Wednesday’s analyst upgrades and downgrades
Others (for everyone)
Musk not worried about Tesla Model 3 demand, but Wall Street is
Ask Globe Investor
Question: Where can I get reliable, detailed information on stock splits of TSX-listed companies since the 1980s? Some, such as the banks, have had several over the years.
Answer: Many third-party financial websites provide information on company stock splits, but the history is usually limited and you can’t be certain whether the information is reliable. That’s why I recommend that you go straight to the source and visit the investor relations section of the company’s website.
All of the big banks provide their stock split history. Do a Google search for “Royal Bank investor relations," for example, and then look under “share information and stock splits." With some banks, you’ll need to hunt around the website. Bank of Montreal, for instance, lists its stock splits history under “dividend information,” but you have to scroll all the way down to the bottom of the page to find it.
I checked a few other companies – Canadian Utilities Ltd., Fortis Inc. and Enbridge Inc. – and in all cases, information on stock splits was provided, along with the long-term dividend history.
I’m not sure why you’re interested in stock splits, but you should remember that splits, in and of themselves, do not create shareholder value. When a company splits its stock two-for-one, investors have twice as many shares, but each share is worth half as much as before the split. So, all else being equal, investors are no further ahead.
The main purpose of stock splits is to increase trading liquidity and, in theory, make the shares more accessible to small investors who want to buy a “board lot” of 100 shares. But with today’s trading systems, it’s just as easy to buy 10 shares, 50 shares or 150 shares. That may be one reason that stock splits are not as common as they used to be. The last Big Five bank to split its stock was Toronto-Dominion Bank, in 2014, and before that, Royal Bank, in 2006.
--John Heinzl
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Compiled by Gillian Livingston
Scott Barlow