ETFs That Will Profit From “The Halo Effect”
25 September 2007 at 10:07 am by Gary Gordon
For baby boomers and the 40+ crowd, it’s difficult to grasp the video gaming phenomenon. We hear the hype. We know that our kids are hooked. And we’ll probably purchase a half-dozen or more titles for the 6-16 year olds in our circle before Christmas time.
Ah Ha… Christmas. Might the tech sector’s 4th quarter supremacy be tied to a seasonal cycle? (See "Tis the Season for Info Tech!") And what exchange-traded funds will be the biggest beneficiaries?
This year, it’s all about the "Halo Effect." Specifically, the release of one particular video game, "Halo 3," will have a positive spillover effect to many technology ETFs.
In brief, "Halo 3" is the most anticipated release in video game history. The Microsoft XBox 360 system alone should garner 4 million copies in just 60 days. And yet, Microsoft is hardly the only company that stands to benefit from a "halo effect" shining positive light across tech companies at large.
You have GameStop (GME) where entertainment software is sold, and other retailers like Best Buy (BBY) and WalMart (WMT). You have online retailers like Amazon (AMZN) and Time Warner’s AOL (TWX).
And then there are the competitors — TakeTwo (TTWO), Activision (ATVI) and Electronic Arts (ERTS). Remember, the "halo effect" means that cheer and goodwill spreads clear across video gaming/tech.
So if tech retailers and tech game-makers are poised to profit, what exchange-traded funds can capture some of the seasonal good fortune? Vanguard Information Technology (VGT) has a 12% weighting in Microsoft, the maker of Halo 3. That’s a good place to start.
Amazon, EBay, AOL (Time Warner) and Yahoo all figure prominently in the Merrill Internet HOLDRS (HHH). There’s little doubt that these companies should benefit from increased XMAS traffic.
Finally, the iShares S&P GSTI Software Fund (IGV) has Electronic Arts and other video game producers in its index. It’s hard to imagine that a subdued sub-segment like software wouldn’t shine by year-end.
Disclosure Statement: As a Registered Investment Advisor, Pacific Park Financial, Inc. may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
