Why Video Game Stocks Are Having a Winning Day

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of video game stocks Game Stop (NYSE: GME  ) , Electronic Arts (NASDAQ: EA  ) , and Take Two Interactive (NASDAQ: TTWO  ) , all rallied nicely today on signs that the industry is turning around.

So what: According to market researcher NPD Group, U.S. physical retail video game sales in August jumped 21% year over year, reversing July's ugly 19% decline. While new hardware sales plunged 40% as gamers continue to wait on the sidelines for November's new console launches, the surge in console and PC-game sales suggests that some new titles are already breathing some much-needed life into the industry.

Now what: With the release of both the PlayStation 4 and Xbox One right around the corner, I'd expect momentum to continue over the short term. "Excluding January 2013, which was up due to an extra reporting week versus January 2012, the last time overall retail video game sales (hardware, software, and accessories) were up year over year was October 2011," NPD analyst Liam Callahan said in a statement. Of course, with the video game publishers as a whole continuing to shift toward digitally distributed games, I wouldn't lean on that data too much when deciding about a long-term investment in the space.     

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