The space industry could have tremendous upside as space travel becomes more affordable. Commercial uses for space exploration could also boost demand and result in meaningful gains for space stocks and exchange-traded funds, or ETFs.
However, the industry is also filled with risks due to high costs, a lack of profitability and unproven demand. It’s unknown whether space tourism will become a big hit among consumers, and there is a lot of speculation within the industry.
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Investors saw just such speculation play out with Virgin Galactic Holdings Inc. (ticker: SPCE). The space-exploration company’s shares nearly doubled in June 2021, but the stock has tumbled 99.3% from that high as of Dec. 16. The strong spikes in 2021 are distant memories, as shares are down by more than 85% year to date, with a 20-for-1 reverse stock split being the only thing that kept SPCE stock eligible for public markets.
Strong stock momentum does not guarantee promising long-term returns, as investors saw with Virgin Galactic. However, its woes shouldn’t deter investors from entering this market. Some of the stocks on this list have comfortably crushed the S&P 500 over the past year.
Furthermore, some space stocks aren’t pure space stocks. These corporations have other segments, like aerospace, that have been generating high revenues and profits for decades.
Wondering which space stocks and ETFs are worth monitoring? These picks have the potential to take your investment to the moon, but as stock prices have skyrocketed this year, you may want to watch for an opportunity to buy in on a pullback:
| Space Stock/ETF | YTD Return as of Dec. 16 |
| Rocket Lab USA Inc. (RKLB) | 386.4% |
| Intuitive Machines Inc. (LUNR) | 406.1% |
| iShares U.S. Aerospace & Defense ETF (ITA) | 18.9% |
| Invesco Aerospace & Defense ETF (PPA) | 29.4% |
| SPDR S&P Aerospace & Defense ETF (XAR) | 27.0% |
| Ark Space Exploration & Innovation ETF (ARKX) | 30.6% |
| Procure Space ETF (UFO) | 26.8% |
Rocket Lab USA Inc. (RKLB)
Space stocks don’t only cater to tourism. Some companies launch satellites into outer space that enable better communication on mobile devices, allow GPS apps to provide directions and help with emergency responses.
Satellites have become critical for many societies, and Rocket Lab USA regularly puts them up in space. The company provides propulsion, spacecraft, satellite platforms and launch vehicles.
Rocket Lab is also growing at a fast clip, as revenue jumped by 55% year over year in the third quarter. The stock has been quite volatile since it went public by merging with a special-purpose acquisition company, or SPAC, in 2020, but its share price has more than quadrupled over the past year. The company was selected by NASA to complete a study contract that will involve retrieving samples from Mars and returning them to Earth. Rocket Lab USA labeled this event as a “first-of-its-kind mission.”
Intuitive Machines Inc. (LUNR)
Intuitive Machines has also been a volatile stock since it went public through a SPAC in 2023. The company’s shares have more than quadrupled over the past year. The recent earnings report showcased 359% year-over-year revenue growth in Q3 2023 as the business gains more traction.
Intuitive Machines wrapped up the quarter with a record $316.2 million in backlog. The company received a $116.9 million contract through NASA’s Commercial Lunar Payload Services initiative, a higher award than for any other CLPS vendor. Intuitive Machines aims to make it easier to travel to the moon, Mars and beyond. Access to other planets can address resource shortages and introduce new opportunities for businesses.
So far, there have been three NASA Lunar Missions. The space-exploration company wrapped up its third quarter with a record $106.9 million cash balance, giving it some financial flexibility as it prioritizes growth over profits, for now.
[SEE: 7 Drone Stocks to Buy for 2025]
iShares U.S. Aerospace & Defense ETF (ITA)
This ETF is a good option to consider for investors who want exposure to space exploration but don’t want the significant volatility of a stock like Rocket Lab or Intuitive Machines.
The ETF can minimize losses during sharp economic downturns, as the fund was up by 10% in 2022, a year that featured many growth-stock meltdowns. ITA also delivers solid long-term returns, as its 10-year annualized return currently sits at 11.7%.
The top three stocks in this fund are GE Aerospace (GE), RTX Corp. (RTX) and Lockheed Martin Corp. (LMT). These positions make up more than 40% of the fund’s total assets. ITA has a 0.4% expense ratio and a 12-month trailing yield of 0.8%.
Invesco Aerospace & Defense ETF (PPA)
PPA has a more diversified portfolio than ITA, with its top three holdings, Boeing Co. (BA), RTX and GE Aerospace, making up about 20% of total assets. The fund has 55% of its assets in the top 10 holdings, though, which is a bit more than ITA. Investors will end up with a higher 0.57% expense ratio, but it’s worth the price to many investors. The Invesco Aerospace & Defense ETF has delivered a superior 14.7% annualized return over the past decade, with a gain of 9.5% in 2022, demonstrating its ability to withstand challenging economic cycles.
Just like ITA, the Invesco ETF isn’t a pure play on the space industry. You will get exposure to corporate giants that make a lot of their money with airplanes, military contracts and other revenue sources that don’t correlate exactly with the space industry.
SPDR S&P Aerospace & Defense ETF (XAR)
The SPDR S&P Aerospace & Defense ETF’s holdings are similar to the other two aerospace and defense ETFs, but there is a key difference. XAR follows an equal-weighted model that doesn’t favor one stock over the other. Large-, mid- and small-cap stocks are equally represented, and the fund is rebalanced each quarter.
That means the top holdings change for this fund more often, and smaller companies have the opportunity to shine. That’s why, in addition to Rocket Lab, Axon Enterprise Inc. (AXON) and Curtiss-Wright Corp. (CW) round out the top three holdings, making up roughly 20% of the fund’s total assets.
XAR’s long-term performance is competitive, based on an annualized 13.9% return over the past decade. The fund has a 0.35% expense ratio and a trailing yield of 0.5%.
Ark Space Exploration & Innovation ETF (ARKX)
The Ark Space Exploration & Innovation ETF caters to investors who want more exposure to pure space stocks instead of companies that have multiple revenue streams outside of the industry.
The fund’s top three holdings, Rocket Lab, Kratos Defense & Security Solutions Inc. (KTOS) and Iridium Communications Inc. (IRDM), make up about 27% of the fund’s total assets. Other notable stocks in the fund’s top 10 include drone maker AeroVironment Inc. (AVAV), Amazon.com Inc. (AMZN) and AI software firm Palantir Technologies Inc. (PLTR).
The fund is relatively new, and its three-year return is nothing to write home about. However, patient investors were rewarded this year with a 30.6% return in 2024.
Although the fund has plenty of space stocks, it’s an actively managed ETF. That means higher costs in this case, with a 0.75% expense ratio.
Procure Space ETF (UFO)
The Procure Space ETF offers a premise similar to ARKX. This ETF offers exposure to pure space stocks as it aims to provide “diversification beyond the limitations of solely earthbound companies.”
The fund doesn’t have the best five-year return, but it has soared by 36.1% over the past 12 months as of Dec. 16, thanks to a 14% allocation to Rocket Lab. As space exploration gains momentum, this ETF has the potential to rally.
Besides Rocket Lab, UFO’s top three holdings include MDA Space Ltd. (MDA.TO) and Globalstar Inc. (GSAT), with a 6% weighting apiece. This trio makes up more than a quarter of the fund’s total assets.
UFO has a relatively consolidated portfolio, with 35 holdings, but it has a lofty 0.75% expense ratio that so far has been absorbed by that monster return this year.
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7 Space Stocks and ETFs to Buy originally appeared on usnews.com
Update 12/17/24: This story was previously published at an earlier date and has been updated with new information.
