Tuesday, August 9, 2016

Pokemon Go, Your 401(k), What Investors Need to Know

The adoption of Nintendo’s Pokemon Go app among smart phone users has been nothing short of astounding. “In just seven days since the game was released (on July 6, 2016) in the US, Australia and New Zealand, Pokémon Go has now almost certainly exceeded Twitter’s 65 million American users.[i]” Perhaps even more mindboggling is the fact that “searches for ‘Pokemon Go’ outstripped those for ‘porn’ for the first time, according to data from Google.[ii]

If Twitter and pornography are suggestive of staying power, it appears Pokemon Go will be around for a while. So, what does an investor need to know about ways Pokemon Go may impact stocks, financial markets, and the economy?

Apparel Sales
Pokemon Go includes three “teams,” which Pokemon trainers can join, Team Mystic, Team Valor, and Team Instinct. Some of the hottest clothing items for school this fall and for the holiday gift-giving season
Team Mystic Hat
will almost certainly be Pokemon Go team apparel. One of the largest licensees for Pokemon Go and dozens of others is Hybrid Apparel of Cypres, California. On December 22, 2014, “Altamont Capital Partners . . . announced it has partnered with existing shareholders to lead a strategic investment in Hybrid Apparel.” While both Altamont Capital Partners and Hybrid Apparel are privately held, investors could potentially benefit from Pokemon Go apparel sales through retailers which “include upscale department stores such as Nordstrom, Bloomingdale’s and Dillard’s; mid-tier stores such as Sears, J.C. Penney and Kohl’s; such discount retailers as Marshalls, Ross and T.J. Maxx; mass-market stores including Walmart (NYSE: WMT) and Target (NYSE: TGT), and clubs Ssuch as Costco (Nasdaq: COST) and Sam’s Club.[iii]

Cellular Service Providers
While the Pokemon Go app is free to download, the game is literally all about roaming.
Pokemon Trainers roam around to find Pokemon while cellular service providers like AT&T Wireless (NYSE: T), Verizon (NYSE: VZ), T-Mobile, Sprint and other stand to benefit with increased revenue. Speaking personally, my family of four shares 15 gigabytes of data each month. Two-thirds through our July billing period, we surpassed that allotment. So, we’ll either pay $15 for each additional gigabyte or upgrade to unlimited data for $50 per month. So will everyone else.

Portable Phone Chargers
Essential contents of any Pokemon Trainer’s backpack not only include Potion, Revive, Lucky Eggs, Poke Balls, Lure Modules, and Razz Berries, but also a portable phone charger. The Pokemon Go app displays bright colors and a dynamic augmented reality screen and consumes smart phone battery chargers faster than a Spearow dodges Poke Balls. (For non-players, that’s fast.) The highest rated portable phone charger at Amazon.com, having more than 10,000 individual reviews and an average rating of 4.7 out of 5, is the ExternalBattery RAVPower 16750mAh Portable Charger Power Bank 4.5A Dual USB Output. Although not a public company, RAVPower chargers utilize Qualcomm's Quick Charge Technology - all of which are covered by an 18 month worry-free warranty,[iv]” and Qualcomm (Nasdaq: QCOM) is a public company.

Craft Beer
External Battery RAVPower 16750mAh Portable
Charger Power Bank 4.5A Dual USB Output
This may seem a bit of a stretch, but follow me here. “Because the franchise just crossed the 20 year mark, the average age of Pokémon fans is hovering in the mid to late 20s[v].” For Millennials, Pokemon is nostalgic, sort of like an Easy-Bake Oven would be for Generation X if Hasbro released an Easy-Bake Oven Go app for iPhone and Droid. They didn’t. Pokemon did. “More so than other generations, millennials have demonstrated a distaste for mass-market beers and spirits—and a preference for the pricier small-batch booze. In one survey, 43% of millennials say craft beer tastes better than mainstream brews.[vi]” Following the logic, then, thirsty Millennial Pokemon Go Trainers will stop into their favorite craft beer oasis, especially those near Poke Stops and especially those whose owners are savvy enough to market to using with Lures and Events. The top three craft beer brewers in 2016 as ranked by the Brewer’s Association are D.G. Yuengling and Son, Boston Brewing (NYSE: SAM), and Sierra Nevada Brewing[vii]. While bigger isn’t always better, size does suggest that the beer is selling and that’s not a bad place to start and, among the top three, only Boston Brewing, makers of Sam Adams, is a public company.
Millenials dig Pokemon Go and microbrews.

Concluding the analysis of Pokemon Go by this MBA single father, and, yes, a very amateur Pokemon Trainer, (my 12 year old son, to whom regular readers of The Single Father’s Guide Blog know I refer as The Favorite Son, plays; I wanted to find another another thing in common), Pokemon go will have a measurable impact on the economy almost certainly in the short run. The mid- and long-term impact is anyone's guess, but those affects could be significant in terms of consumer behavior. In any case, I plan to put my money where my mouth is and invest in at least one, if not more than one, of these publicly traded companies. Of course, I won't name names, although I can tell you I wish I'd mortgaged the house a month ago and bought some Nintendo (OTC: NTDOY).

You and your 401(k) can thank me later.

[i] “Pokémon Go becomes global craze as game overtakes Twitter for US users.” TheGuardian.com. July 12, 2016. 
[ii] “More people are now searching Google for Pokémon Go than for porn.” The Telegraph. Telegraph.co.uk. July 13, 2016. 
[iii] “Fun, flexible and forward-moving: Apparel company emphasizes innovation through retail partnerships.” Quinnen, Bill. The Orange County Register. ocregister.com. June 22, 2016. 
[iv] “About RAVPower.” RAVPower.com. Accessed 7/29/16. 
[v] “The Streets Are Littered with Adult Pokémon Go Players. Cawley, Conor. TechCo.com. July 11, 2016. 
[vi] “10 Things Millennials Buy Far More Often Than Everyone Else.” Tuttle, Brad. Money. Money.com. July 31, 2015. 
[vii] “These Are America's 10 Largest Craft Breweries.” Kell, John. Fortune. Fortune.com. April 5, 2016.