What Stocks Poised to Profit From Pokemon Go?

The Pokemon Go app is believed to be generating a million dollars US a day, which puts it on par with top mobile games, such as Candy Crush and Clash of Clans. It's probably too late to buy Nintendo's (JP:7974, US:NTDOY) stock, which trades on the pink sheets in the US and the main exchange in Tokyo, with its significant climb this month, but there are still opportunities to make profits on this craze.

The release of the game occurred in the the third quarter (or second half for European readers) of the calendar in the US and Australia first, which means most earnings reports due this season will not include revenue related to the game. In fact, the game has not yet released in Japan, strangely. With that said, there are at least three industries that may see a pop in Q3 earnings and here's your chance to take advantage.

Telecommunication
Telecom stocks are poised for an earnings surprise in October and probably the biggest beneficiary. Data and roaming revenue will undoubtedly be fractionally higher. Most national carriers refrain from offering unlimited data and summer typically brings new contracts. Customers and parents dishing out the bill may be asked to offer or bundle better data plans. Canadian dollar investors may want to look at Rogers Communications (CA:RCI.B, US:RCI), Telus (CA:T), and BCE (CA:BCE, US:BCE) on the Toronto Stock Exchange. An added benefit: these companies offer attractive dividend yields and have a history of raising dividends every four to six quarters. Even if you end up stuck with these trades, they may turn into great investments for one's portfolio. If you want to stick with American telecommunication companies, consider Dow components Verizon (US:VZ) and AT&T (US:T). Both companies also offer generous dividends.

Historically, telecommunications also outperform the broader market during times of low or negative economic growth as investors seek safety and yield. Sales of battery charging units and portable kits are also expected to rise which boosts profit for companies like Best Buy (US:BBY) and many other electronic companies.

Cellphone Manufacturers
The second industry that will be a beneficiary of this Pokemon craze would have to be phone companies. Software updates on older phones typically stop after a while. The Samsung S3, for example, is unable to play the game, although there are ways around that do allow tech savvy users to catch em all. However, for thr general population, this game may be the catalyst that pushes customers to upgrade their phones which may also offer better battery life and faster game play. Apple (US:AAPL), Google/Alphabet (US:GOOGL), and Samsung (KR:005930) should see some sales boost in the third quarter. These companies also offer phone charging units as sales for these products have seen a jump.

Utilities
Thirdly, one could argue utility stocks could see a boost in demand for power. Charging phones three times or more should provide a small revenue boost. This is also another industry that outperforms during periods of slow economic growth; any boost in power consumption could offer yield hunters some capital appreciation. Transalta (CA:TA) in Canada is a major player and there are nearly a dozen US companies worth over $10 billion in market cap. The top three American stocks in market cap as of 2016 are Duke Energy (US:DUK), NextEra Energy (US:NEE), and Southern Co. (US:SO). If you're looking for a boarder based play, the iShares US Utility Index (US:IDU) offers exposure to an abundance of energy stocks in America.

It must be noted that these companies have not yet released second quarter earnings and if guidance for the third quarter is provided which discusses increased revenue from Pokemon Go, the trade may yield smaller returns. The US stock market is currently at a record high and it is important to be aware that most analysts are bearish at this point. If you are looking for an inexpensive way to play these trades, call option spreads may be a more efficient alternative. Good luck and happy trading.

Disclaimer: At the time of this article, I did not own any stocks or derivatives on the companies mentioned. Household owns BCE.