This High-Growth Tech Sector Will Make You Stinking Rich

Let’s take a look at the stats for North American Palladium Ltd. (TSX:PDL) and see why it’s a solid buy for a fast-growing industry.

| More on:
Couple relaxing on a beach in front of a sunset

Image source: Getty Images.

This year alone, global e-sports income is expected to reach $1.1 billion, representing a massive jump of 27% compared to 2018, with everything from advertising, interesting new sponsorship deals, and a whole host of media rights deals combining to drive revenue from competitive video gaming.

The following three stocks represent three very distinct routes to exposure in this billion-dollar industry. From materials to hardware to retail, here are three of the best companies to invest in if you’re bullish on gaming as one of the major entertainment industries of the 21st century.

North American Palladium (TSX:PDL)

While it may be an indirect route to the e-sports industry, the fact is that snapping up miners of high-cost metals used in the electronics are a smart play in this space. Palladium is used in electrode plating, making it one of the top four metals for an electronics bull to invest in after gold, silver, and platinum.

Down 12.11% in the last five days, there is a clear value opportunity present in North American Palladium. With three-year returns of 124.5%, it’s worth the punt, and while its year-on-year returns of 19.1 may not be as high, they still beat the Canadian metals and mining industry as well as the TSX index for the same period.

A one-year past earnings-growth rate of 230.2% is another solid reason to get invested, with a five-year average past earnings-growth rate of 45.6% showing a strong all-round track record. A 22% past-year return on equity indicates high quality, as does a reduced level of debt to net worth, which has been slashed from 107.6% five years ago to the current 8.9%.

Nvidia (NASDAQ:NVDA)

Up 2.19%, Nvidia is arguably the frontrunner when it comes to e-sports investment, but besides gaming, this one popular tech stock also covers artificial intelligence and self-driving cars, plus the hotly discussed semiconductor industry.

Five-year returns of 935% are significantly high, and anyone holding for that period of time will be surely glad they did. However, Nvidia underperformed the U.S. semiconductor industry over the last year, which itself saw rather lowly returns of 5.1%.

A solid track record and improved balance sheet are on display, with one- and five-year past earnings-growth rates of 36.1% and 49.5% characterizing the former and a reduced level of debt compared to net worth from 30.9% to 21.3% over the past half-decade characterizing the latter.

GameStop (NYSE:GME)

While far from being an exhaustive list, the closest this roundup can come to being comprehensive would be through including a retailer. GameStop is the obvious choice here, since it covers all bases in terms of gaming paraphernalia. However, negative one- and five-year past earnings-growth rates and an increasing level of debt compared to net worth has increased over the past five years detract from GameStop’s track record and balance sheet.

There’s good news here, though, since GameStop is selling at considerably less that its future cash flow value; with a P/B of 0.8 times book, it’s a nicely undervalued option, while a high dividend yield of 15.25% and significant 121.7% expected annual growth in earnings make for a solid high-growth play.

The bottom line

North American Palladium is the way to go here if you want to buy Canadian while getting indirect exposure to gaming plus tech in general. A P/E of 6.1 times earnings and P/B of 1.3 times book show great value for money, while a small dividend yield of 0.95% and 4.2% expected annual growth in earnings sweeten the deal. Looking beyond the TSX index, Nvidia is the clear winner for direct exposure.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of GameStop and NVIDIA and has the following options: short April 2019 $13 calls on GameStop. Nvidia is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

RRSP Savings: 2 Top TSX Dividend Stocks to Build Retirement Wealth

Here's how investors can turn small initial RRSP contributions into substantial savings for retirement.

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 BMO ETFs Are Less Volatile Than BMO Stock

Two ETFs of a big bank are more suitable for risk-averse or ultra-conservative investors than its stock.

Read more »

Target. Stand out from the crowd
Dividend Stocks

1 Cheap Dividend Stock to Buy as Recession Fears Rise

Great-West Lifeco (TSX:GWO) is an undervalued financial stock that looks like a great buy, even as the world economy tumbles…

Read more »

Profit dial turned up to maximum
Dividend Stocks

2 TSX Stocks Paying Over 5% in Dividends

Add these two blue-chip dividend stocks to your portfolio for wealth growth through shareholder dividends and capital gains.

Read more »

Business people standing near houses models
Dividend Stocks

2 REITs to Own as Rental Housing Demand Rise

Two prominent residential REITs should be on your buy list, as the rental housing market picks up due to rising…

Read more »

Retirement plan
Dividend Stocks

FIRE Movement: How to Retire Early Using Your TFSA

You can increase your financial independence and even retire early by investing in solid dividend stocks in your TFSA over…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: 2 Stocks to Buy Now for a Personal Pension Fund

RRSP investors can find top TSX dividend stocks at cheap prices today.

Read more »

Cogs turning against each other
Dividend Stocks

1 Passive-Income Stock to Counter Volatility

Looking for a stock that can counter volatility now and tomorrow? This stock is a reliable option for growth and…

Read more »