Author Archives: Scalper1
How Amazon Aims To Disrupt Microsoft, Sony In Gaming Consoles
Video games are far from the first thing that comes to mind when thinking of e-commerce leader Amazon.com ( AMZN ). Yet the company’s conspicuous presence at the March Game Developers Conference suggests it is ready to play. At the San Francisco conference, Amazon set up one of the largest exhibits, a multilevel edifice complete with artificial grass. Within the compound, a massive black booth was emblazoned with the logo of Twitch, the video-game-focused live streaming site Amazon bought in 2014 for nearly $1 billion. And nearby rested a machine that printed T-shirts. The company was courting developers, giving out swag and touting its new game engine called Lumberyard. This — its game development business focused on creating high-quality titles — is part of Amazon CEO Jeff Bezos’ efforts to strike gold in the $40 billion video game market. “Amazon’s interest in games is entirely a function of our focus on customers,” Mike Frazzini, vice president Amazon Games, told IBD. “G ames is a really interesting space, where there’s a number of different sets of customers to obsess about.” Amazon has been in gaming for more than a decade, selling games via its e-tail website. Still, Wedbush analyst Michael Pachter told IBD the company is behind its rivals. “Amazon is late to the party,” Pachter said. “But it’s more committed than others. Bezos never was into games, and he’s trying to get it all — music, video and now games.” Frazzini wouldn’t comment on whether the company was late: “We’ve been focused on gamers, game developers, and this body of customers that sits kind of in the middle, for a long time.” Amazon May Not Need Its Own Console Some observers say Amazon could come out with its own game console. But Pachter says Amazon might look to disrupt the game console market by enabling some of its devices, such as its Fire TV or Kindle, to play lower-end games. “What do you need a console for?” Pachter said. “Why not get an Amazon Fire TV box?” If costs fall, though, perhaps a console is possible, he says. “What if (in the future) a super high-end graphics card is $10 and a CPU $25? Then Bezos could sell you a console for $50.” New game consoles now start nearer to $300. Amazon declined to comment on future plans. Apple ( AAPL ) and Alphabet ‘s ( GOOGL ) Google also are in position to attract more video game business, Pachter says. Patcher sees smartphones also taking more and more business from consoles. Today’s phones are already powerful computers, he says, and will only improve — with better graphics chips and microprocessors. He says smartphones could be used to play even high-end video games broadcast onto a television. Sony ( SNE ) didn’t respond to requests for comment. Microsoft ( MSFT ) didn’t make executives available to comment. Nintendo ( NTDOY ), the third of the big console makers, was hit hard when smartphones became commonplace for mobile gaming, since Nintendo had focused on its own devices. Still, Sony and Microsoft have a strong research and development effort behind their PlayStation and Xbox consoles, so Amazon would not find it an easy market to disrupt, some say. “Sony and Microsoft have a large market share,” Sterne Agee analyst Arvind Bhatia told IBD. “I don’t know when Amazon can launch its own console. It’s a very difficult market to crack open.” Amazon Lumberyard And Underground Underground is a novel concept in the industry. Instead of trying to attract players with free mobile games and then up-sell them on virtual swag once playing, Amazon says that its approach, which it calls Underground, encourages developers to make better games that keep players playing. To compensate developers, Amazon pays for every minute played, but it’s unclear just how Amazon plans to make money with such a strategy. In September, Underground had about 700 games, and analyst Pachter says it’s looking to establish itself as a dominant content market, much like the way Amazon dominates e-tail. Still, content still remains king in the video game industry, which is likely why Amazon built Lumberyard, a development platform that provides the building blocks software engineers need to make games quickly and efficiently. One of Lumberyard’s selling points is that it’s hooked in to Amazon Web Services (AWS), the company’s cloud computing services provider. “T he idea of L umberyard is to provide a triple-A game engine that’s capable of achieving the highest possible quality of game, t hat’s also deeply connected with AWS to allow games to connect to the cloud to create those multiplayer experiences to help them grow and build a vibrant audience of fans,” Frazzini said . Amazon aims to leverage its range of e-commerce-related gaming businesses to attract developers. If Amazon can make inroads among developers, then it gains key leverage in the video games field. “Video gaming is a razor blade model — consoles make no money,” analyst Bhatia said. “It’s imperative you get support from content creators.” But several developers told IBD they’re concerned with how Amazon is structuring the deal, fearing that a loosely worded license agreement will let the Seattle-based company bully them in the future into using other Amazon add-on services, such as Twitch or AWS. Amazon Must Build Trust With Game Developers Likewise, Amazon needs to convince developers to switch from one of the two dominant video game engines — privately owned Unreal and Unity. Developers have to chose one, and the costs of changing are high. According to analysts, Lumberyard doesn’t offer a valuable enough reason to switch. To succeed, Amazon will have to earn developers’ trust. Amazon’s Frazzini says that while building Lumberyard, Amazon consulted a “small group” of customers in a “confidential fashion, who helped guide the development of what we ended up building. And the response has been very positive.” Spokeswoman for video game powerhouse ActivisionBlizzard ( ATVI ) Mary Osako declined to comment on Lumberyard and Amazon’s plans. Rival Electronic Arts ( EA ) spokeswoman Sandy Goldberg said that the company has “a number” of Android mobile app games on Amazon’s Underground platform and that the company works closely with Twitch as well, though she declined to elaborate further. But Amazon doesn’t see the video game engine market as a winner-take-all. “There are some game engines that developers can choose from, and that’s what’s great about the games industry — developers have a choice,” Amazon spokeswoman Rena Lunak told IBD via email. “We think the industry is more than big enough to support multiple commercial game engines. ” One way Amazon is trying to woo developers through value-added services is with Amazon Merch, which lets content creators hawk T-shirts on their storefronts featuring their brand and get royalties on each sale. While on the periphery of Amazon’s gaming push, it serves to illustrate that Amazon’s approach is comprehensive, and it is willing to leverage its massive e-commerce platform in any way possible. Another method for wooing developers is by linking AWS to the Lumberyard engine — among other services that Amazon’s mighty e-commerce empire offers. The ability to use its massive scale and expertise in e-commerce might be enough to ensure that Amazon can stake its claim in the video game market.
4 ETFs Surge To Top Rank Ahead Of Q1 Earnings
Though the stock market has made an impressive comeback from the worst nightmare it saw at the start of the year, volatility and uncertainty continue to dominate. This is especially true, given the expected Q1 corporate earnings decline for the fourth consecutive quarter. Amid this sluggishness, many investors still want to bet on a slowly improving U.S. economy, which is backed by a healing job market and rising consumer confidence. The rebound in the oil price from its 12-year low, the Fed’s dovish comments and the resultant weakness in dollar, added to the optimism, raising the appeal for riskier assets. For these investors, we delved into the Zacks ETF Rank to find the best picks. The system takes into account factors such as industry outlook and expert surveys; and then applies ETF-specific factors (like expense ratios and bid/ask spreads) to spot the best funds in each and every corner of the space. Using this system, we have picked a handful of ETFs that earned a Zacks ETF Rank #1 (Strong Buy) in the latest ratings update and could thus outperform (see: Our Zacks ETF Rank Guide ). Since earnings growth is expected to be negative for 11 of the 16 Zacks sectors, we have focused on four low-risk, broad ETFs rather than specific sectors. Each of these funds has seen its rank surge to the top hierarchy from #3 (Hold) and could be great picks this earnings season. Vanguard Mid-Cap Value ETF (NYSEARCA: VOE ) Investors seeking to participate in the growing economy, but wary of soft earnings, should consider mid-cap stocks in the basket form. This is because mid- caps are arguably safer options allowing both growth and stability simultaneously in a portfolio. These middle-of-road securities have the potential to move higher in turbulent times when compared to large and small caps. Further, honing in on value securities in this capitalization level ensures safety to investors. Value investing includes stocks with strong fundamentals – earnings, dividends, book value and cash flow – that trade below their intrinsic value and are undervalued by the market. In particular, VOE seems an exciting pick heading into the earnings season. The fund tracks the CRSP US Mid Cap Value Index, charging investors just 9 bps in annual fees. It holds 208 stocks, which are well spread across each component as none of these holds more than 1.3% share. Financials takes the top spot with one-fourth share while consumer goods, industrials, consumer services and utilities round off to the next four spots with a double-digit allocation each. It is one of the popular and liquid ETFs in the mid-cap space with AUM of $4.5 billion and average daily volume of 302,000 shares. The ETF has added 0.2% in the year-to-date time period. WisdomTree MidCap Dividend Fund (NYSEARCA: DON ) Dividend-focused ETFs have been riding high this year on investors’ drive for income amid heightened uncertainty in the stock market. This is because dividend-paying securities are the major sources of consistent income when returns from the equity market are at risk. Dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less immune to the large swings in stock prices. Further, longer-than-expected interest rates have made this corner a hot investment area. As a result, DON seems an interesting choice for the coming months. This ETF provides exposure to the mid-cap segment of the U.S. dividend paying stocks by tracking the WisdomTree MidCap Dividend Index. The fund has been able to manage assets of $1.6 million and trades in a moderate volume of 80,000 shares a day on average. Expense ratio came in at 0.38%. Holding 402 stocks in its basket, the product is widely diversified across each component with each holding less than 1.8% of assets. From a sector look too, the fund is pretty well spread out with financials, consumer discretionary, utilities and industrials taking the double-digit exposure each. DON returned 11.1% so far this year. Schwab Fundamental U.S. Small Company Index ETF (NYSEARCA: FNDA ) Small-cap ETFs have lagged the broad market for the most part of this year due to endless worries stemming from the China turmoil and an oil price collapse. This trend seems to be reversing lately given the spate of upbeat economic data, an impressive rebound in oil prices, and of course, the spring fervor. The pint sized stocks generally outperform when the American economy is leading the way. Given this, investors should recycle their portfolio into the small-cap space to obtain a nice play and FNDA could be an excellent pick (see: all the Small Caps ETFs here ). This fund provides a complement to market-cap indexing and active management by following an innovative indexing approach using fundamental measures of company size by tracking the Russell Fundamental U.S. Small Company Index. In total, the fund holds a large basket of 884 securities with none accounting for more than 0.29%. Financials and industrials take the top two spots at 22.5% and 20.6%, respectively, closely followed by consumer discretionary (16.7%) and information technology (13.5%). FNDA is less liquid and less popular in the small-cap space with AUM of $688.3 million and average daily volume of 178,000 shares. Expense ratio came in at 0.32%. The ETF is up 0.8% in the year-to-date time frame. First Trust Small Cap Value AlphaDEX Fund (NASDAQ: FYT ) As small caps are risky options which could lead to extreme volatility stemming from huge gains and losses in a very short period of time, value stocks could provide some stability in the portfolio. This is because value stocks often overreact to both positive and negative news, resulting in share price movement that does not reflect the company’s true long-term fundamentals. This creates buying opportunities in such stocks at depressed prices. There is also potential for capital appreciation when the stock finally reflects its true market price. As a result, investors could focus on FYT for the coming months. This fund follows the NASDAQ AlphaDEX Small Cap Value Index, which uses the AlphaDEX methodology to select stocks from the NASDAQ US 700 Small Cap Value Index and ranks them on both growth and value factors. The approach results in a basket of 262 securities with none holding more than 0.74% of assets. Financials, industrials, consumer discretionary and information technology are the top four sectors accounting for a double-digit exposure each. FYT is often overlooked by investors as depicted by its lower level of AUM of $44.8 million and average daily volume of under 20,000 shares. It charges 70 bps in fees per year and has gained 0.5% in the year-to-date period. Original Post