Tencent is one of the stocks in my 10 stocks for 10 years portfolio. In fact it is my largest holding (when you consider that Tencent shares owned by Naspers. Some others have performed better since my reboot of the portfolio in August of 2018: Apple (from 225 to 318) and Danaher (from 103 to 162) and Naspers (33 to 34, which might not seem so great but 2 spinoffs provide another 15) but I still like Tencent a great deal for the next 8 to 10 years.

Tencent has quite a few huge global businesses. One of the most promising areas is Tencent Gaming. Tencent has ownership in many of the largest computer gaming companies globally.

Tencent’s ownership share in Gaming companies

• Tencent Games – Honor of Kings (Arena of Valor outside of China) and esports leagues
• Riot Games (100%) – League of Legends and esports leagues
• Supercell (84%) – Clash of Clans, Clash Royale, and Brawl Stars
• Epic Games (40%) – Fortnite and Unreal Engine (gaming engine used to create many games)
• Activision Blizzard (5%) – Call of Duty, World of Warcraft, StarCraft, Diablo, Hearthstone, Heroes of the Storm, Overwatch, Guitar Hero and Candy Crush. They are also involved with esports. (Activision Blizzard is a public company in the USA valued at $46 billion)
• Ubisoft (5%) – Assassin’s Creed, Far Cry, Just Dance and Prince of Persia. (public French company worth $8.7 billion)
• Grinding Gear Games (80%) – Path of Exile
• Glu Mobile (14%) – many smaller games (public USA company valued at $915 million)
• Bluehole (12%) – PlayerUnknown’s Battlegrounds
• Paradox Interactive (5%) – Stellaris, Europa Universalis, Hearts of Iron, Crusader Kings, Cities: Skylines (public Swedish company valued at $1.2 billion?)
• Funcom (29%) (public Norwegian company valued at $145 million – after the stock price increased last week due to a Tencent a buyout offer)
• Sumo Digital (10%)

Tencent also have an undisclosed majority stake in Miniclip. And they own large portions of Huya and Douyu, both are big players in streaming games (similar to Twitch and YouTube Gaming).

Tencent’s subsidiary, TiMi Studios, developed Activision’s Call of Duty: Mobile.

Tencent gaming revenue struggled in 2019 due to regulatory actions in China created problems for all game publishers there. Long term global gaming revenue should continue to grow quickly and Tencent stands to be one of the best positioned companies to profit from that trend.

Tencent gaming revenue accounts for about 30% of Tencent’s revenue.

Tencent owns or has invested in more than 800 companies to date. Over 150 of those companies are valued at more than $1 billion. An broad overview of Tencent’s platforms is shown in this figure from their 2019 3rd quarter presentation.

Tencent has a market capitalization of $470 billion, making it one of the top 10 most valuable companies in the world.

Related: Amazon Using a Costco Strategy? – It is Not Time to Sell Apple (2013) – Interview with Investing Blogger John Hunter (2015)

Comments