How to Profit in a Digital World

Virtual reality (VR) is carving a major segment in the entertainment market, and it’s just getting started. While the VR market totaled just $17 billion last year, it’s projected to explode.

The pandemic sped up its growth timeline due to less frequent human interactions, new work-from-home procedures and with online education gaining speed.

Mordor Intelligence sees the total VR market value growing 49% per year from 2020-2026, reaching $185 billion by the end of the period!

The chart below shows the VR market’s projected elevenfold increase over the next seven years:

Source: Mordor Intelligence

 

VR’s utility isn’t limited to just entertainment and gaming. VR can be used for training in the military, sports and healthcare, in addition to innovative solutions in other industries like education, film and fashion.

A critical component of virtual reality’s future impact is through a concept dubbed the “metaverse.” While extremely broad, it refers to a virtual world with interoperability among users.

We see the term often in the crypto space with virtual art and land auctioned for hundreds of thousands to millions of dollars.

Non-fungible tokens (NFTs) have taken the art and collectibles market by storm, with celebrities, athletes and art dealers all trying to stake their claim in the metaverse.

Savvy technology companies are getting in on the ground floor and preparing for liftoff.

Kering SA’s (KER.PA) luxury brand Gucci launched a partnership with Roblox Corp. (NYSE: RBLX) to enter the metaverse, and it sold products virtually on its platform for a limited time.

Meanwhile, Epic Games raised $1 billion in April to fund its metaverse operations.

Facebook Inc. (Nasdaq: FB) CEO Mark Zuckerberg claimed in the company’s July earnings call it will be transitioning to a metaverse company, and it shows the founder’s vision about the future of social interaction.

Facebook is one of my top ways to gain exposure to this trend without many pure-plays.

Pick 1: Facebook Inc. (Nasdaq: FB)

Facebook is fully committed to the future of VR and the metaverse. The company acquired Oculus in 2014 for $2 billion, which should serve it well in delivering cutting-edge hardware for an immersive online experience.

In the recent July earnings call, Zuckerberg emphasized that “people will transition from seeing us primarily as a social-media company to seeing us as a metaverse company.” That’s a huge pivot for a trillion-dollar company generating 98% of its revenue from advertising on its platforms last year.

Zuckerberg sees the metaverse as a decentralized entity, and he intends to expand it. Facebook shouldn’t have any trouble monetizing in the metaverse.

Looking at Facebook’s chart, we see that it took full advantage of stay-at-home orders during the pandemic.

 

Facebook is trending positively, and it continues setting all-time highs in a choppy market.

Pick 2: Roundhill Ball Metaverse ETF (NYSEARCA: META)

META is a recently launched exchange-traded fund (ETF) offering access to a basket of companies engaging in several critical functions for building, maintaining and expanding the scope of the metaverse.

Its strategy targets companies providing computing power, networking services, content creation and more.

This ETF tracks the Ball Metaverse Index, which exclusively focuses on established companies with market capitalizations over $250 million and liquidity of over $2 million per day over its prior six-month history.

META’s top holdings include NVIDIA Corp. (Nasdaq: NVDA), Roblox Corp. (NYSE: RBLX) and Tencent Holdings Ltd. (0700.HK).

It has an expense ratio of 0.75%, and its 10-day average volume is about 100,000 shares. Since the fund is new, be sure to exercise caution and — as always — perform your own due diligence before buying anything.

While the internet has changed lives forever, VR and the metaverse could be the next turning point in the evolution of human interactions.

And from an investment standpoint, it’s incredibly exciting that there’re ways to play it.

All the best,

Sean

About the Editor

Supercycles aren't daily occurrences. They happen in stages and can last for years. Sean Brodrick identifies them early and mines for the most financially sound stocks within them. And he taps into the powerful Weiss Ratings, along with our proprietary AI Performance Booster, to help him do it!

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