Space investments range from the practical to the exotic.
The high-profile launches from private spaceflight companies such as Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin drew the attention of the public, but there’s a catch: You can’t invest in them. Because these companies are private, investments are limited to institutional investors and private equity firms. Fortunately, there are a slew of other publicly traded companies that space enthusiasts can buy, such as firms involved in satellite, ground equipment and launch vehicles. According to a Harvard Business Review article, the space economy earned $366 billion in revenue in 2019, 95% of which was from the space-for-Earth sector, which includes telecommunications, internet and national security satellites. Another burgeoning sector is space-for-space, which deals with exotic activities and products like mining asteroids, orbital habitats and tourism. Investors bullish on the space economy can buy these seven stocks and exchange-traded funds, or ETFs, in 2022.
Virgin Galactic Holdings Inc. (ticker: SPCE)
The poster child for publicly traded space companies is billionaire Richard Branson’s flagship company Virgin Galactic Holdings. The company’s debut craft, SpaceShipOne, became the first private vessel to achieve supersonic flight via rocket propulsion in 2003. Eighteen years later, on July 11, 2021, Virgin Galactic launched Branson, three employees and two pilots into space on Unity 22, soaring above the 50-mile-high Kármán line. By September 2021, Virgin Galactic became certified by the Federal Aviation Administration for commercial spaceflight travel, with hundreds of prospective passengers booking seats at a hefty price tag of $450,000 per person.
Lockheed Martin Corp. (LMT)
Lockheed Martin isn’t exactly a pure-play space stock, but the company is an established blue-chip player in the closely related defense and aerospace industry. The company is best known for manufacturing the next-generation F-23 Joint Strike Fighter, or JSF, with the bulk of its revenue coming from government contracts. Still, Lockheed maintains a sizable segment devoted to manufacturing satellite and missile technology. Notably, the company provided numerous mission-critical components to NASA for its Lucy mission to Jupiter and the Orion mission to the moon. The company also teamed up with Amazon.com Inc. (AMZN) and Cisco Systems Inc. (CSCO) to integrate Amazon’s Alexa and Cisco’s Webex into its Callista crew interface technology.
Rocket Lab USA Inc. (RKLB)
Rocket Lab went public in 2021 via a special-purpose acquisition company, or SPAC, reverse merger. The company mainly focuses on providing launch services for other space and defense organizations, in addition to designing and manufacturing spacecraft components. As its name suggests, the company specializes in rockets and orbital launch vehicles. Recently, Rocket Lab won a contract with NASA’s Jet Propulsion Laboratory to supply solar panels for the latter’s Cooperative Autonomous Distributed Robotic Explorers (CADRE) program. In October, the company also launched its 31st Electron rocket.
Ark Space Exploration & Innovation ETF (ARKX)
Space investors who wish to diversify their investments can opt for an ETF in lieu of single-company stocks. A potential pick here is ARKX, which holds a portfolio of 35 to 55 companies engaged in space exploration and innovation. ARKX sorts its underlying holdings into four thematic categories: orbital aerospace, suborbital aerospace, enabling technologies and aerospace beneficiaries. The ETF is actively managed, which means it does not track an index. Rather, the fund management team has broad discretion to use fundamental and technical analysis to pick and weight stocks as it sees fit. Currently, the ETF costs an expense ratio of 0.75%.
Procure Space ETF (UFO)
Don’t let the name fool you; UFO doesn’t invest in aliens. Rather, this ETF tracks the proprietary S-Network Space Index, which tracks 46 companies that derive at least 50% of their revenue or profits from the space industry. This index sorts its holdings into five industry categories: rocket and satellite manufacturing and operation; ground equipment manufacturing; space technology and hardware; space-based imagery and intelligence services; and telecommunications, television and radio broadcasting. U.S.-based companies account for about 73% of the ETF. Like ARKX, UFO charges an expense ratio of 0.75%.
SPDR S&P Kensho Final Frontiers ETF (ROKT)
ROKT tracks the S&P Kensho Final Frontiers Index, which uses artificial intelligence and a quantitative weighting methodology to select companies that are involved in the exploration of what it terms “the final frontiers.” This not only includes space, but also extends to the deep sea. Nonetheless, aerospace and defense companies such as Lockheed Martin, Northrop Grumman Corp. (NOC), Boeing Co. (BA) and Rocket Lab make up a large portion of its top holdings. Over 95% of the ETF is held in U.S. companies, with a small percentage allocated to U.K. and Israeli firms. ROKT is also cheaper than UFO and ARKX, with an expense ratio of 0.45%.
iShares U.S. Aerospace & Defense ETF (ITA)
While not a pure-play space ETF, ITA grants good exposure via its heavy allocation toward large-cap U.S. aerospace and defense stocks. This sector can often outperform during times of geopolitical crisis or war due to its counter-cyclical demand. ITA achieves this exposure by tracking the Dow Jones U.S. Select Aerospace & Defense Index, which holds space-involved companies such as Lockheed Martin, Boeing and Northrop Grumman in its top constituents. With about $4 billion in assets under management, or AUM, it is one of the most popular ETFs for tracking the aerospace industry. ITA has an expense ratio of 0.39%.
7 space stocks and ETFs to watch now:
— Virgin Galactic Holdings Inc. (SPCE)
— Lockheed Martin Corp (LMT)
— Rocket Lab USA Inc. (RKLB)
— Ark Space Exploration & Innovation ETF (ARKX)
— Procure Space ETF (UFO)
— SPDR S&P Kensho Final Frontiers ETF (ROKT)
— iShares U.S. Aerospace & Defense ETF (ITA)
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Update 11/01/22: This story was previously published at an earlier date and has been updated with new information.