Space Investing: Here’s what you need to know…

Space is cold, but space investing is heating up. Space-linked stocks are rocketing higher as the Bezos-Branson-Musk billionaire space race escalates.  Next week, Sir Richard Branson, along with five crew members will take off aboard Virgin Galactic’s (SPCE) Unity rocket plane in what could be a momentous turning point for the space tourism industry.  But billionaire’s aren’t the only ones with a vested interest in intergalactic innovation.   

There is great effort from not only high-profile billionaires and startups to develop new space technologies, but also from Governments and Aerospace & Defense giants from around the world with tremendous R&D power. 

The Space Economy is a multi-billion dollar industry today, but many are expecting to surpass $1 trillion in the coming decades.  Which is bringing new opportunities for investors to potentially capture this growing segment of the global economy. The Commerce Department is already throwing its support behind the American space industry with ambitious goals for regulatory reform and promotional efforts.

A few big names are making headlines, but the truth is, many of the companies that could make huge future contributions in the industry may still be in their infancy and may not be getting much notice yet.  Further complicating matters, the in-depth knowledge and understanding of this highly specialized industry required to adequately evaluate these companies can be overwhelming.  

Since many of the companies in the space arena haven’t had much time to establish themselves yet, space investing can be risky.  Why not let the pros take care of some of the leg work while casting a wide net over many exciting prospects in the field?  Our team recommends investing in space-linked stocks through an ETF (exchange traded fund) like the two we’ll cover in this article.

Procure Space ETF (UFO)

UFO is the first global aerospace & defense fund.  UFO tracks the S-Network Space Index, which focuses on companies that are significantly engaged in space-related activities. The companies included in this fund span several industries, including (a) satellite-based consumer products and services; (b) rocket and satellite manufacturing, deployment and maintenance; (c) space technology hardware; (d) ground equipment manufacturing; and (e) space-based imagery and intelligence services. 

The fund divides its constituents into two tranches. The first tranche is comprised of non-diversified companies that derive at least 50% (but typically 100%) of their revenues from space-related activities. The second tranche is comprised of diversified companies that play a significant role in the production of space technology and equipment. The non-diversified tranche is then given 80% of the weight of the Underlying Index and the diversified tranche is given 20% of the weight.

UFO Portfolio Data

  • Weighted Average Market Cap  $33.34B
  • Assets Under Management  $128.06M
  • Number of Holdings  38
  • Price / Earnings Ratio  45.22
  • Price / Book Ratio  1.91
  • Expense Ratio  0.75%
  • Distribution Yield  0.98%

SPDR Kensho Final Frontiers ETF (ROKT)

ROKT seeks to provide investment results that correspond generally to the total return performance of the S&P Kensho Final Frontiers Index.  ROKT focuses on US-listed companies whose products and services are driving innovation behind the exploration of deep space and deep sea. The underlying index is a combination of two sub-indexes, one that follows space travel and exploration, and another that follows the remotely operated or unmanned aerial, underwater, and surface-level drones market.

 The methodology involves scanning company documents and SEC submissions for search terms to determine inclusion in the index. Selected stocks are deemed either core or non-core depending on whether one of ROKT’s themes is a central focus of the company. Holdings are initially weighted equally, with an overweighting factor applied to core stocks.  The fund may invest in equity securities that are not included in the index, cash and cash equivalents or money market instruments.

ROKT Portfolio Data

  • Weighted Average Market Cap  $40.34B
  • Assets Under Management  $22.51M
  • Number of Holdings  36
  • Price / Earnings Ratio  52.65
  • Price / Book Ratio  3.63
  • Expense Ratio  0.45%
  • Yield  1.72%

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