Investing in Videogames

Published on 09/16/21 | Saurav Sen | 2,475 Words

The BuyGist:

  • This is a top-down reconnaissance of the videogaming world.
  • We use our proprietary Investability Rating system to zoom into viable investment candidates.
  • In the process, this turned out to be a good window into how our Investability Rating system works.
  • First and foremost, our Investability Rating system is about Risk Management - minimizing the chances of overpaying.
  • Second, it's about capturing Positive Optionality - maximizing the chances of buying an asset that will positively surprise the market.

How Investable are they?

We’re digging into Videogames because:

  1. They keep ranking well in our Watch Lists, and…
  2. We’re looking to put some cash to work.

How do we know that they rank well in our Watch List? Because they have good Investability Ratings. We’ll use this excuse to play up the Investability Ratings system that we developed for our Watch Lists. Don’t worry, we’re not marketing. It’s just that our Investability Ratings allow us to cut through the noise while we look around for investment opportunities.

So, let’s cut through the noise. The chart below shows that within our Watch List (of about 150 companies), our little universe of Videogame companies ranks quite well (top-right is good, bottom-left is bad; we’ll explain later). And for this research piece, we also included Roblox in our universe. Why not?

In the rest of the article, we’ll peel the layers behind this chart, and zoom into one or two preferred investment candidates.

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