dople - I play around with some spare cash from time to time, and have researched the gaming market several times, but always go with something a bit less volatile. If you do your research carefully, you can make an absolute killing playing gaming industry stocks. While it CAN pay off very well, there are always alternatives that are less risky with higher earning potential.

It's a bit of a misconception that an investor will make their money depending on how well a game performs on the market. From what I've been able to tell, the safest bet is to try and play the release announcements, instead of game performance. Buy after a game flops or a quarterly doesn't meet market expectations, and then sell at the end of the market day after a huge title is announced. A serious gambler knows that it's almost always a better idea to get out with a minimal gain 90% of the time than to get the big take 10% of the time. By cutting out BEFORE a game can garner more than it's initial burst of publicity, you're still earning, and removing a large portion of the risk. You don't want to hold on too long and watch your investment roll steadily downhill due to production delays, layoffs, management changes, Hillary Clinton, or other unexpected factors.

Another little tip to play in ANY industry is to keep track of large volume trades.. If three EA officers just increased their current holdings in EA by 10%, it's probably a good time to look into buying EA stock. The same obviously works in reverse. If officers are shorting, you should be following suit. This happens a lot in the gaming industry, and just bookmarking a handful of insider trading watchdog sites can net you some pretty interesting information on who will be doing what. Of course make sure you learn to read the charts and keep up to snuff on quarterlies and press releases, and all of the homework you'd do on any other company in any other industry.

This is all just from my own understanding and experience. My "education" in the stock market is only a few years old, and has all been learned first hand by just jumping in money first.

I'm hopeful a few other folks can clarify a bit more for you, and potentially give us both a few tips beyond what I can offer.

Dude, put that money in some old milk cartons in the attic. Trust me.

Unless he's changed his mind, Jim Cramer has been yelling 'buy buy buy' over EA's stock.

Journalists For Peace, now accepting donations. Send to Fletcher c/o Fletcher.

I wouldn't go with EA. I hear there's a boycott.

Hmm. I shouldn't really write much, as I have a big meeting to prepare for, but I work in the business.

First off, investing in something you know isn't a bad idea, especially if it's something that's not easy to understand. While the pros are getting better at understanding the business, I do think there are inefficiencies. Unfortunately, since gaming is a 'hot' sector, your edge is probably more in what to avoid, rather than what to buy. Pros, for instance, were picking up shares in Electronic Arts (ERTS) based in part on the Superman Returns game coming out. As a gamer, you'd probably be less optimistic on Superman Returns, and avoid the stock.

It's possible to turn that around, but it can be hard. For instance, you could have realized that Activision (ATVI) would benefit from Marvel Ultimate Alliance and Guitar Hero 2, but that's worthless info now. You should have acted on that three months ago.

And it's not like that's all you need to know about the company. A good company may not be a good stock, if the assumptions in the stock are too high. Maybe Gamestop (GME) is a good business, but will they really double the money they make by 2010? That's the betting line, so to speak.

This is not a way to fund a retirement. If you want to do that, buy a diversified mutual fund or a bond fund. View game investing as a hobby, and realize that you can easily lose money doing this.

*cough* Hot Coffee *cough*

Take-Two's stock bottomed out after Hot Coffee and several weak earnings reports, but it's been steadily creeping up again hasn't it? I recall it being as low as $8, but it's over $15 again. Though today, they finished the stock option investigation and are now reporting that almost ten years of financial statements may be wrong so perhaps this isn't the best time to jump back in. Normally, I wouldn't quote a Kotaku article as journalism, but they also quote the press release.

I've been contemplating starting up a thread about this for a while, but never had the time to put in the serious effort needed. Here's as much information that I can think of at this time that might help you with starting up investing.

First, a couple of points. Poppinfresh has it right in that in personal trading of individual stocks is not to be done with your retirement nest egg and has the potential to lose you all that you've invested. Add on the required disclaimer of "Past performance is no guarantee of future results" and we've got the warnings out of the way. Only invest what you're willing to lose.

I am a firm believer in the "Efficient Markets Theory" and don't put much stock (literally) in Day Trader activity, heavy graph analysis and frequently jumping into and out of stocks in an attempt to time the market. Those methods tend to hurt you by racking up tons of trading fees and short-term capital gains penalties.

I decided 4 years ago that since I spent so much money on Video Gaming and technology upgrades, and watched all my friends do it as well, I might as well get in on the back end of the sale and purchase stock in the companies that benefited most from these purchase habits. (Buy what you know!) I did some research into online stock trading companies and found that Scottrade fit my situation the best, with its $7 per trade and only a $500 deposit to open an account.

My current holdings in the market are (full disclosure):
ATVI Activision
AMD Advanced Micro Devices
BBY Best Buy
ERTS Electronic Arts
GME Game Stop
MSFT Microsoft
NTDOY Nintendo
NVDA Nvidia
TGT Target
THQI THQ
TTWO Take Two
UBSFF Ubisoft
VIVEF Vivendi Universal

And my current "Fun Money" speculative investments.
MCZ MadCatz
TIVO TiVo

Other stocks I've held but currently do not have in my portfolio.
SNE Sony
MWY Midway
ATAR Atari
MVL Marvel

If you do invest, here are several tips that I hope help others avoid the "Painful" lessons.

Keep Excellent Records - At a minimum, you should know what stocks you currently hold, what you paid for them, when you bought them, what their current price is, and your current capital gains/losses. Although trading companies have some web applications that can help you track this information, I personally use a simple excel spreadsheet that has been heavily modified over the years. Either way, knowledge is power, and having this basic information at your fingertips is extremely helpful in giving you the complete picture of what the implications are of any given purchase/sale.

Fees - Don't buy and sell constantly. Consider that a $500 stock trade with a $7 commission immediately equals a 1.4% fee, remember that you'll probably be selling this stock at a later date (hopefully for a profit) and will also incur a similar fee at that time. Your capital gains, if any, can be quickly consumed by your trading fees. Larger volume trades also reduce the overall impact of that fee, if you were to buy $2000 of the same stock, your fee would only be .35%

Taxes - If you sell a stock for a profit, after holding it for less than a year, you will be hit with short term capital gains taxes at a rate of 28-33%. If you sold the same holding after a year, you would be subject to a lower long-term capital gains rate of 20%.

Market Timing - Contrary to popular belief, knowing that company X has a hit on its hands does not necessarily guarantee a big jump in stock prices. Many of these companies are so large that individual game hits can be easily offset by failures, R&D on other games, or even litigation. A few great examples are Take Two's (TTWO) problem with the Hot Coffee mod and subsequent negative press as well as recent investigations into Nvidia (NVDA) and ATI (now merged with AMD) stock option pricing and monopolistic activities. These are good companies who's stock prices are being negatively affected by factors outside the norm.

Outside Sources - Remember that whatever "Hot Tip" you know about, or whatever Jim Kramer is currently ranting about is being acted upon by quite a few people at the same time. You don't want to be in that group of people, even if it is a good tip (which is at best a 50-50 proposition), you want to be the person that bought the stock weeks/months or even years ahead of time. Your best bet investing in individual companies is to buy good companies with solid financial bases, good management teams and a history of making good decisions. Buying Nintendo Stock now might be a good investment for the future, but buying it a year ago would have given you an 80% increase in price.

Protective Stops/Limits - If you don't know, stops are triggers that can be set up in your account to automatically sell a stock once it has reached a certain price. Protective stops are triggered trades that you can enter for your holdings that will sell a certain amount of shares once it's reached a price of $X. "Limits" can also be set that prevent a trade from being made when a stocks price has fallen too far. Example: If you have Take Two stock set with a stop price of $14 and a limit price of $13.75, your account will automatically attempt a sale of that position if the price falls below $14, but stays above $13.75. It can be a good tool to aid you in selling your shares before they drop too much, however figuring out where to place your protective stop can be tricky, as you don't want them to sell prematurely.

Diversification - I'm not the best practitioner of this as I'm heavily concentrated on the electronics sector, but I have at least diversified my positions within that sector as well as weighting the individual holdings of certain companies on the creation and retail ends. I'm obviously betting quite heavily on the future viability of technology and videogames. Your risk tolerance may be significantly different and you'd be right.

I'm not going to tell you what to buy, it's your responsibility as an investor to figure out what purchases you want to make, but I will say that the videogame sector has been exceedingly rewarding for me, and I'm personally "Long" on it. There's a ton of stuff I'm probably missing here, but it's enough of a start, if anyone has specific questions to ask, I'm more than willing to try and answer, but only about the process, NOT about the viability of certain stocks.

Edited for format changes.

Wow thanks for all the detailed info.... I'll be sure to read and re-read this whole thread again before I continue my research, a lot of useful knowledge here. Don't think I'll be a millionaire any time soon, but it could be fun to play a little game of prediction with the gaming market trends as long as the stakes are not too high...

Thanks again!

Activision is sitting at $17.42 a share as of right now, so you might just be sitting on a bigger chunk o' change!

Personally, I believe that the videogame industry/retailers are going to grow at a faster rate than the economy (and therefore S&P index funds) and I will say that my hobby money in the industry is turning out to be a much better investment than I had initially expected. Additionally with dividends being paid out to supplement simple capital gains, stock splits, mergers and buyouts, it's a pretty interesting field to invest in.

Here's a quick example of the 06 performance for the above mentioned game stocks when compared to the average market performance using the S&P. (Translation: The amount a given stock has increased or decreased from 1-3-2006 to 12-12-2006.)

Investment % Difference
Mad Catz (MCZ) -12.00%
Electronic Arts (ERTS) -2.91%
Sony (SNE) -1.84%
Take Two (TTWO) 9.42%
Microsoft (MSFT) 11.22%
S&P (market) 11.25%
Vivendi (VIVEF) 20.39%
Activision (ATVI) 25.90%
THQ (THQI) 39.12%
Ubisoft (UBSFF.PK) 49.90%
Gamestop (GME) 74.56%
Nvidia (NVDA) 87.28%
Nintendo (NTDOY) 98.04%

Personally, I find that investing that excess cash sure beats having it sitting around soaking up a 1.5% rate of return in your checking account.

Pffft...I keep most of my extra cash in an ING Direct account (currently at 4.50% interest rate)!

This is just my "Fun" investing money, my retirement money is diversified in a nicely balanced portfolio and relatively boring. I in no way endorse putting all your long term investment money in any single company. Additionally, if you invest in the "market" you get a pretty guaranteed rate of return over the long haul because you're reducing your risk. Higher returns generally come at higher risk. I'm not advocating going out and buying a fistful of derivatives and stock options here, as that's akin to slapping down a pile of money on some green felt and shouting "All of it on 15 black!"

This is also true to a point, and where your knowledge of the business enters in to making decisions as to when buying and selling makes sense. "Buy Low, Sell High" is the basic idea, unfortunately, no-one (not even the people running the companies) have a 100% grasp on when exactly that trade should occur. As a side note, if they did have 100% of the information, that would be insider trading and therefore illegal..

If you were to believe that a stock, let's say Sony, were going to be having a rough year coming up, you might want to sell the stock now and repurchase it later when the market has finally determined that Sony is overvalued. This has risks in lost opportunities that might pop up if Sony were to suddenly ship out 10 million new PS3's and BluRay won the next-gen DVD format war. You'd be left thinking "I wish I still held my Sony stock!". On the other hand, if you decided to hold on to those shares you might be subject to a precipitous drop in their value. When do you sell? Only you know..

All I'm saying here is that if you're interested in investing in the videogame sector, it can be a viable opportunity, but as always, knowledge is power, knowing which companies are worth investing in can go a long way towards avoiding problem investments. Also, if actually being interested in what you're investing in makes you more motivated to save additional funds for investing, it's most definitely a good thing.

*Financial Thread Necromancy Begin!*

I figured it's about time to refresh this thread with some recent information, specifically; I'm looking at movement in stock prices from Jan 3rd, 2006 to July 2nd, 2007. How have stock prices been doing since the last look? I've expanded the information to cover a few additional gaming related and tech stocks. Here's a new look.

*Due to the Pink Sheet nature of Ubisoft, historical share prices are approximate to those dates.

Standouts include:
Nintendo showed an impressive 199% price increase in the past 18 months. The already profitable Wii and DS are doing amazingly well so far and show no signs of slowing down.

Nvidia showed a 133% price increase in the past 18 months. I don't see a direct cause-effect reason for this, but they do have very strong video card releases at the same time as an OS release that places huge demands on visual effects.

Ubisoft showed a 129% price increase in the past 18 months, they had several Wii launch hits (Red Steel, Rayman Raving Rabbids) as well as Next Gen hits (GRAW 1-2, R6 Vegas), and their porting to all consoles with most game releases has served them well.

Sony showed a 25% increase in the past 18 months. Sony's Bravia line of TV's look to be making up for the current operating losses in their entertainment section (PS3).

Midway showed a 64% decrease in price over the past 18 months. Bad games + bad management = stock price punishment. Here's hoping they can make a bit of a comeback with Area 51: Blacksite, Lord of the Rings Online and Stranglehold.

Electronic Arts showed a 9% decrease price over the past 18 months. I'm guessing it's just a cyclical price correction, as EA tends to move in a pretty predictable cycle in the summer doldrums.

It's nearly a no-brainer to say that this Fall and Winter are looking to be a nearly perfect storm of "Big Name" releases. Just off the top of my head there's: *deep breath* Halo, GTA4, Mass Effect, Bioshock, Heavenly Sword, Splinter Cell: Conviction, Assassin's Creed, Lair, Madden 2008, Stranglehold, Metroid Prime 3: Corruption, Skate, Ratchet and Clank: Future, Half Life 2 Orange Box, Resident Evil – Umbrella Chronicles, Enemy Territory: Quake Wars, Unreal Tournament 3, Army of Two, Devil May Cry 4, Rock Band, Guitar Hero 3, Call of Duty 4, Brothers in Arms: Hells Highway.. *wheeze"….cough* And a ton of other smaller releases. Granted, the install bases for next-gen consoles aren't as large as they were during the Halo2- GTA/San Andreas holiday release, but it's looking damn promising.

Also, this is probably going to be the first holiday where stocks of all game consoles should be readily available (increased with the possible exception of the Wii) and potentially price-reduced or feature increased. Here's hoping Ninty gets its manufacturing ducks in a row and has enough stock for demand over the holidays.

If there's any interest, I'll try and keep this going with quarterly posts. It's a great time to play videogames, and an equally good time to own videogame stocks. (It'll get better when all the stock options scandals and ratings fiascos are a time of the past"… should that ever occur.)

Full Disclosure: I have owned shares in all of these companies at some point in time over the past several years. I currently own shares in: AMD, ATVI, BBY, ERTS, GME, MSFT, NTDOY, NVDA, TGT, THQI, TIVO, TTWO, UBSFF, VIVEF. This is merely a report as to how my investing in the game and gaming-related market has progressed, your results may vary. Although I will state that I enjoy having video games pay me (in dividends and capital appreciation) for a change.

I still wish I had some money to put into Interplay. They are effectively a dead company but are still in operation and their stock is still active and they are once in a while getting a bit of revenue from things like GameTap licensing and the like. Even though they are only worth like $0.001 right now, a lot of people think they could shoot as high as $1 if they actually get their debtload down enough to sell. Massive risk to be sure but putting even $100 into them at their current price could do very well even if they go to like $0.50. I just wish all the web trading places I can use from Canada didn't want like $3,000 down to start.