Top Three Metaverse Plays that Aren’t Facebook

By Keith Kaplan

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As much as Mark Zuckerberg would have you believe he and Meta Platforms (FB) hold the keys to the coming metaverse his company is just one of the significant business and financial opportunities emerging in this space.

And it may not even be the strongest.

Today I’m going to show you how companies other than Facebook are leading development on metaverse technology and infrastructure, positioning their companies for a stake in the trillion-dollar revenue grab.

And I’ll show you three ways to play this up-and-coming trend.

You might even be able to snatch these opportunities up at a discount, as an anticipated Fed rate-hike campaign draws down the information technology sector en masse.

Early this week, the 10-year U.S. Treasury yield was meandering around a two-year high of 1.78%. And rates are expected to move much higher. When interest rates rise, future profits are reduced, depressing the value of stocks. Because of its traditionally high valuations, the tech sector is particularly vulnerable.

But over the next few years, the metaverse could easily serve as the next big igniter for tech stocks.

The reason: The metaverse is widely touted as the next iteration of the internet, or Web 3.0. It promises immersion in 3D, virtually integrated environments where you’ll interact with others — through an avatar — in a digital world.

Like “the cloud” before it, the metaverse opens the door to all sorts of new opportunities — many of which haven’t even been imagined yet. Promoters claim you’ll be able to conduct meetings and trainings with staff, enjoy immersive gaming experiences like nothing before, purchase goods and services, and even educate students with this exciting new technology.

There’s only one problem.

The metaverse is still in its earliest stages. There are substantial hurdles, the most urgent being that the technology hasn’t advanced enough, nor has server capacity expanded enough, to meet the expected demand.

This is one reason it’s so difficult to nail down an accurate description of what the metaverse will look like, because nobody knows for sure.

But that’s OK; all of that makes the metaverse a ground-floor opportunity. I believe when these challenges are solved — and I do believe it’s “when,” not “if” — the companies that stepped up, and their shareholders, will be richly rewarded.

Today, I’m highlighting three opportunities that offer you a way to share in the wealth.


Metaverse Play No. 1: Microsoft ( MSFT)

With its just-announced $68.7 billion deal for gaming giant Activision Blizzard, the $2.28 trillion (market value) Microsoft has pulled an ace from its sleeve.

Microsoft CEO Satya Nadella told investors that “gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms.”

And the Activision buyout is one of those rare transactions that will pay off in the here and now — and will keep paying off when the metaverse “arrives.”

Once the deal is finalized, Activision will join a gaming unit at Microsoft that just delivered a record $16.28 billion in 2021 — a year-over-year increase of 17%. We’re talking about a business that already has the Xbox line, the 3D sandbox video game Minecraft, and a subscription service called Game Pass. The addition of Activision will set Microsoft up as the third-largest gaming company in the world.

And don’t forget about Microsoft’s cloud-services business, Azure, whose privacy, artificial intelligence (AI), development, and monetization capabilities will be essential pieces of the metaverse’s “backbone” buildout. Or LinkedIn and Office365, which will help companies conduct real business in the new virtual realm.

“We believe [it’s] Microsoft that is best positioned to be a big winner from the metaverse,” Bernstein analyst Mark Moerdler wrote in a recent research note.

Examining Microsoft through the lens of TradeSmith’s tools, we see a stock that’s skidded nearly 13% since the new year began. And Microsoft has plenty of company: As the end of January approaches, we find that nearly a quarter of all information technology sector stocks are in the Yellow Zone — with a hawkish Fed serving as the proximate cause.

However, our Stock Ratings tool reveals it as a Strong Bullish asset, promoted by 12 financial newsletters and reported in the portfolios of eight billionaire investors. That shows healthy conviction for Microsoft.

And while the information technology sector did slip into the “wait-and-see” Yellow Zone, you can see that for the 12-month stretch that ended Jan. 1, shares zoomed upward 27.8%. And even before it creates ripples in the metaverse, Microsoft’s software, cloud, and gaming businesses are all healthy and growing.


Metaverse Play No. 2: Roblox (RBLX)

Like Microsoft, Roblox has taken a hit from Fed interest-rate fears. And as with Microsoft, I’m also optimistic this is a temporary pullback — not one triggered by any failings of the company itself.

It took less than eight months from its March 2021 public offering for Roblox shares to nearly double in value. But from that Nov. 15 peak at $134.72, the shares started a slow-motion drawdown that brought them down to their support level just above $65.

Roblox is attractive because, in many ways, it already is the metaverse. Or at least, it resembles what the metaverse could look like. Roblox is a popular gaming platform that creates virtual experiences for gamers and boasts an average of 32 million daily users and 9.5 million developers.

Roblox will grow as a popular partner for other companies because of its ability to connect consumers with Gucci, Vans, Nike — and even the NFL. Those brands will be able to extend their reach into the digital realm by creating virtual versions of their wares that players will want to buy and use deep inside the metaverse. Viewed that way, Roblox could serve as one of the drivers of this intriguing next level of the internet.

We don’t yet have enough historical data on Roblox to determine its volatility; our system requires at least one year of historical trading data to quantify a stock’s risk. But for now, consider monitoring it in a watch portfolio with a VQ% Trailing Stop anyway. This trailing stop’s default is 25%, but once we have enough historical data on Roblox, the trailing stop will adjust to reflect the stock’s risk.

After trading publicly for 10 months, Roblox is already promoted in four newsletters we track and by two billionaire investors. It’s accessed in more than 180 countries, it’s available in 11 languages, and, as a gaming platform, it’s poised to benefit massively from ongoing metaverse development.

Metaverse Play No. 3: Roundhill Ball Metaverse ETF (META)

Not sure which stock is the right play? Consider an ETF. Roundhill Investments launched its Metaverse ETF (META) back in June.

Led by strategist Matthew Ball, META (whose ticker will change to METV on Jan. 31) exposes investors to a basket of 50 companies that are “collectively positioned to drive the future of the internet,” according to Roundhill Investments co-founder Will Hershey.

The metaverse is still under development, yet I believe META represents a good opportunity for diversified exposure to major categories of the metaverse.

Like Roblox, this ETF is new, so it’s smart to exercise a bit of caution: Consider a VQ% Trailing Stop if you decide to add META to your portfolio.


That’s Three Strong Metaverse Plays

Today we looked at the stark challenges of bringing the metaverse to fruition and what that means for the companies (and investors) that will make this virtual world “real.”

We examined three power plays that position you to reap the rewards of the next generation of the internet: Microsoft, Roblox, and the Roundhill Ball Metaverse ETF.

Meta Platforms (Facebook) may be a given in this movement. But it’s not the only game in town.

I’m curious; what do YOU think the metaverse will look like, and how will it change the way we interact, do business, or even make money? Will you be investing?

Email me your thoughts. I’d love to hear from you.