Space: the final frontier. Once seen as a purely public sector venture, space travel and exploration have gained steam in the private sector thanks to the successes of Jeff Bezos's Blue Origin and Elon Musk's SpaceX. And while a voyage on the starship Enterprise is likely still a lifetime or two away, you can make a space investment now with an eye toward the future.
Space exploration in the private sphere is still in its infancy, and pure plays in the market are hard to come by. To have diverse space investments, you must consider not just those firms launching rockets but companies that defend the skies and supply necessary components. Investing in space right now is very speculative, and you'd be wise to temper expectations and only invest capital you can afford to lose. But the potential is compelling, so today, we'll explore different ways to invest in the space industry.
Basics of the Space Industry
In 2021, the former Captain Kirk himself, William Shatner, partook in a Blue Origin spaceflight, making him the oldest person ever to reach outer space. And based on Shatner's comments, the trip left him awestruck and inspired. The vastness of space is challenging to comprehend, and recreational space travel would sound like pure science fiction just a decade ago.
But as space travel becomes more open to the public, the industry could expand in several ways. Obviously, NASA is the main generator of public space exploration, but they outsource much of their work to government contractors like Lockheed Martin Corporation (NYSE: LMT) and Northrup Grumman Co. (NYSE: NOC).
Additionally, private space industry companies have entered the fray. Not only do engines and components come from publicly-traded companies, but space tourism is finally becoming available to private citizens. Of course, much like the early days of commercial air travel, commercial space flights are absurdly expensive and currently out of reach to anyone but the wealthy and famous. But that doesn't mean the sector is uninvestable; there's more to space exploration than just carrying tourists into the vacuum.
Overview of Space Stocks
If you're trying to invest in SpaceX or Blue Origin, you might be waiting a while. Elon Musk may take Starlink public by 2025, which would offer an indirect way to invest in SpaceX, but it's unlikely you'll find SpaceX or Blue Origin shares in your brokerage account anytime soon.
While your options for investing in space exploration are somewhat limited at the moment, you won't find a shortage of companies looking to aid in constructing rockets, building and ship components or launching satellites into orbit. Investing in defense contractors and component manufacturers may sound boring compared to rocket launches and space travel, but most investable sectors consist of these indirect avenues.
Ways to Invest in Space
Despite the infancy of the private space industry, there are still a few different ways to gain exposure to the sector. Consider the following themes of space investment and consider which fits best into your investment plans. These companies trade publicly on major exchanges and include some very low-priced stocks.
Commercial Space Flights
SpaceX and Blue Origin may remain in private hands. Still, one publicly-traded company offers commercial space travel to anyone with the cash to book a ticket — Richard Branson's Virgin Galatic Holdings, Inc. (NYSE: SPCE). Virgin Galactic went public with a special purpose acquisition company (SPAC) in 2020 and offered recreational space flights to wealthy individuals. However, actual space flights from the company have been slow, mainly due to the astronomical $450,000 price tag. But as of now, Virgin Galactic is the only publicly-traded company pursuing commercial space travel.
Aerospace and Defense
The aerospace and defense sector is home to some of the largest (and most profitable) blue-chip government contractors in public markets. In the United States, the three biggest companies with eyes on the stars are the Boeing Company (NYSE: BA), Lockheed Martin and Northrup Grumman. All three firms are engaged in space research and development projects, such as transportation systems and space defense technologies.
Satellites
Most spacecraft launched from Earth don't need to go far to fulfill their mission. Hundreds of thousands of satellites orbit the planet daily, providing phone, TV and internet services to billions of individuals, companies, institutions and governments. Some publicly-traded companies that launch and use satellites for their operations include DISH Network Co. (NASDAQ: DISH), Momentus Inc. (NASDAQ: MNTS) and Globalstar Inc. (NYSEAMERICAN: GSAT).
Components Manufacturers
Think about all the research, design and construction required to build a spacecraft that successfully launches itself into orbit through the teeth of gravity. Rockets need engineering expertise that's hard to come by, although with thousands upon thousands of different parts of components. Some of these parts are made by well-known industrial suppliers like Honeywell International Inc. (NASDAQ: HON), but also consider more direct space industry names like Maxar Technologies Inc. (NYSE: MAXR), Rocket Lab USA Inc. (NASDAQ: RKLB) and AeroJet RocketDyne Holdings Inc. (NYSE: AJRD).
Sector ETFs
If you can't decide which space industry segments to invest in, you can always buy the whole sector through specialized ETFs. Direct space ETF plays include the Procure Space ETF (NASDAQ: UFO) and SPDR S&P Kensho Final Frontiers ETF (NYSEARCA: ROKT). Suppose you don't mind some indirect exposure to the sector. You can include Global X Robotics and Artificial Intelligence ETF (NASDAQ: BOTZ) or the ARK Autonomous Technology and Robotics ETF (NASDAQ: NYSEARCA).
Four Steps for Investing in Space Stocks
If you're considering an investment in the space industry, be sure to give some thought to the following steps before putting any capital to work:
Step 1: Weigh the pros and cons of investing in space exploration.
Investing in space sounds exciting, but you'll need to manage expectations and consider alternatives if you're looking for stock investments that will pay off quickly. Space exploration may produce some big-time winners in the capital markets. However, those successes could take years or decades to materialize.
Step 2: Consider how much capital to devote to space stocks.
If the pros outweigh the cons in your eyes, you'll need to consider how much of your available cash should go toward space stocks. Since space exploration is a relatively new and volatile sector, keep your positions small and keep this sector from absorbing too much of your portfolio.
Step 3: Research different companies and ETFs.
Next, you'll need to decide which stocks and ETFs to buy. Consider whether you want direct or indirect exposure to the sector and whether you want that exposure through stock picking or buying ETFs. There aren't a ton of investable securities in this area, so you won't have to sift through a mountain of reports and financial data.
Step 4: Invest in the companies that align with your goals.
Finally, consider your goals as an investor and buy the securities that best fit your needs. Every investor has a different financial plan, and you may find that exposure to risky pure plays isn't the best idea. How long do you plan to remain invested? And can you tolerate the "fear of missing out" should other sectors outperform space stocks? Answer these questions before hitting the buy button on your selected space stocks.
Future of Investing in Space Stocks
Investing in space sounds like an exciting way to make money, but the time frames for commercial viability are often at odds with the desires of investors. A private space industry is an entirely new business sector operating in the harshest environments. Running a company in this field is fraught with potential landmines, and applying the usual tech sector motto of 'move fast and break things' is a recipe for catastrophe.
To succeed, space industry companies will need to take a long-term view and make incremental progress. Making space travel safe and affordable for the public won't be easy, and you can't cut corners when dealing with explosive rockets and high-speed objects. Setbacks, failures and missed opportunities are inevitable. Of course, this isn't what shareholders want to hear on quarterly conference calls. Space investment will require patience and risk tolerance to withstand the ebbs and flows of pioneering.
Space Exploration Stocks Offer Possibilities, but Manage Expectations
It's hard not to get upbeat about space exploration and commercial travel prospects. The list of people who have ventured outside the Earth's atmosphere is small, and it's likely that many consumers would be willing to part with vast sums of money to experience the thrill of spaceflight. Not only is private space travel exciting, but the ability to put satellites in order and reach across the globe is the dream of all major communications service providers.
The opportunities are as vast as the solar system, but so are the risks. Space travel is dangerous, and missteps can't happen. Getting men to and from the moon was a colossal achievement that required training, expert engineering and the right mindset. Making these same journeys safe for regular folks could prove just as difficult. When investing in space exploration, you must manage your expectations and accept the same timelines as the companies. Slow and steady will win this race, and if you have short-term investment goals, your capital might be better off in another sector (especially one with fewer companies near 52-week lows).
FAQs
Here are a few frequently asked questions about investing in space:
What is the best space stock to invest in?
Choosing the 'best' space stock right now is difficult since the most recognized companies (SpaceX and Blue Origin) are off-limits to public investors. Investors need to consider their goals and desired level of exposure and select the best stock (or stocks) for that approach.
Is there a space mutual fund?
You can't buy a mutual fund with a space industry theme. However, several different ETFs have direct and indirect exposure to the space exploration sector.
Can I invest in space?
Yes, you can! You can invest directly in space travel through Virgin Galactic or indirectly through satellite providers, component manufacturers and rocket constructors.
