For those of you who have been reading my articles on the video game sector on The Futurist, know that I have been a fan of Activision (ATVI) since 2006. It was first identified, along with other gaming companies, on April 17, 2006. After that, ATVI was a component of my 2007 portfolio, earning a 69.2% return. Even for 2008, while I shed the other gaming stocks like ERTS, THQI, and retailer GME, I kept Activision as the only gaming stock, and one of only three tech stocks, in my 2008 portfolio. Yet, it has delivered a 50% return since the start of the portfolio, after its strong Q1 results last Thursday.
Everyone knows that the 'Guitar Hero' game is a blockbuster, but what is less understood is how such games that have customized controllers (a guitar, in this case) are the future of gaming. The multi-button controller is not appealing to adults at all, and as the guitar controller eventually inspires skis, boxing gloves, golf clubs, etc., the realism and hence market appeal of games broadens to even more demographics. Just note the success of the Nintendo Wii as another indicator of this trend. Read my article "The Next Big Thing in Entertainment" on The Futurist for an in-depth analysis of this subject. Activision is set to launch three new Guiter Hero games in 2008, placing the company at the forefront of this major trend.
The stock might be nearing the end of a momentum run after such a spectacular return, and I may cease to include it in future portfolios until it pulls back to a better entry point, but as a long-term bet in the technology sector, Activision is still one of the best stocks to hold.
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