Investing In Space: 7 Space Stocks and ETFs to Watch

·6 min read

The space business includes satellites and the rockets to put them in orbit.

In July, while high-flying billionaires were dominating the headlines, the U.S. Department of Commerce published an opinion piece to much less fanfare saying the U.S. needs the best possible data to help track some 29,000 objects in space orbit now and the estimated 50,000 new satellites expected by 2030. While the main point of the article was to highlight a cloud-based data repository, it also highlighted the growing importance of satellites. That in turn is just one of the ways space-related companies are making money. The business of space also includes building the rockets to get satellites into orbit and laying the groundwork for space tourism. "Combined with billionaire private interests, it is clear that pace of space technology development is not slowing down -- accelerating mankind's capabilities of exploring the final frontier," says State Street Global Advisors, which provides one of the exchange-traded funds included in this look at some of the best space companies to watch today.

Astra Space Inc. (ticker: ASTR)

As the space industry matures, Francois Chopard, CEO of startup incubator Starburst Aerospace, says daily rocket launches will be required -- and that's just the frequency Astra is aiming for by 2025. The company is among several startups preparing next-generation rockets that are more efficient and cheaper than their predecessors, Chopard says. This California-based satellite launch services company designs, tests, manufactures and operates next-gen space services aiming to enable a new generation of global communications, earth observation, precision weather monitoring, navigation and surveillance capabilities. Astra may be a smaller player than Elon Musk's SpaceX, but it's actually publicly traded, making it one of the best space stocks to watch right now.

Lockheed Martin Corp. (LMT)

In its most recent quarter, LMT brought in more than $17 billion in revenue, with more than $3 billion coming from its space segment, which builds satellites and spacecraft for government and commercial customers. The company has announced its intent to buy Aerojet Rocketdyne Holdings Inc. (AJRD) for more than $4 billion. The transaction would bring a premier aerospace and defense rocket engine manufacturer under the roof of what is already the world's biggest defense contractor. But the deal is getting extra regulatory scrutiny, with both companies receiving requests for additional information from the Federal Trade Commission. One thing to keep in mind when owning a big defense contractor for its space-related activities is that they're a relatively small part of the business. So even if the space segment goes gangbusters with commercial orders, other parts of the company might suffer if, for example, the Pentagon's budget gets cut.

Virgin Galactic Holdings Inc. (SPCE)

This space travel company builds advanced air and space vehicles and aims to provide spaceflight services for private individuals and researchers. Much like the rocket that took Virgin Galactic's founder Richard Branson to the edge of space, the company's stock shot higher in July but has since come down. Shares trade for around $31 per share, well off their July peak of more than $50. As exciting as its rocket planes are, consider that the company has no revenue and is operating at a loss. That's often the case with many young companies and isn't necessarily a bad thing, and the company narrowed its loss substantially in the first quarter. But investors do have to balance the excitement of a story stock with the likelihood of it eventually earning money. Still, if the stock can reach $52 on a relatively early stage flight, there could be potentially significant upside if the company's plans really do take off, making it one of the top space stocks in the market.

Iridium Communications Inc. (IRDM)

With a network of 66 low-earth orbiting satellites providing subscribers with voice and data connectivity all over the globe, Iridium keeps people, as well as the Internet of Things, connected in far-flung corners of the earth where other internet service simply doesn't exist. In its most recent quarterly report, Iridium said it has increased total billable subscribers to more than 1.6 million from more than 1.3 million during the period a year prior, highlighting it as a space stock to watch in 2021. Iridium recently raised its full-year outlook for service revenue growth to between 4% and 5%.

SPDR S&P Kensho Final Frontiers ETF (ROKT)

Samuel Miller, a senior investment strategist with Signature Estate & Investment Advisors, points toward a different approach for space investing than picking individual stocks. "I lean towards picking ETFs to invest in the new space race since there are not enough pure space plays at the moment," he says. "Current industries like defense and aerospace, machinery, semiconductors, etc., are poised to benefit from the increased spending in space exploration." He says ROKT fits the bill. The multisector space fund has allocations in traditional aerospace and defense companies as well as technology and communication services firms as it "seeks to capture companies driving space exploration innovation -- the pure plays as well as the firms supporting the ecosystem (i.e., the suppliers)," according to State Street Global Advisors. Top holdings include Raytheon Technologies Corp. (RTX) and Honeywell International Inc. (HON).

Procure Space ETF (UFO)

Here's another way to get exposure to space-related businesses while also getting the diversification that comes with owning more than one name. By investing 80% of the fund into companies that earn at least half of their revenue or profits from one or more segments of the space industry, the fund isn't too dependent on big defense contractors that derive a lot of revenue from sources other than space. While it's invested in Lockheed Martin, Raytheon, Boeing Co. (BA) and Northrop Grumman Corp. (NOC), none of them are among the fund's top 10 holdings.

ARK Space Exploration and Innovation ETF (ARKX)

This ARK ETF aims for exposure to orbital and sub-orbital aerospace companies, those that provide enabling technologies, as well as business benefiting from aerospace activities -- such as agriculture, internet access, global positioning systems, construction and imaging. The fund "offers a tool for diversification due to little overlap with traditional indices," according to its fact sheet. Its top holdings include some companies on this list, such as Iridium, but others are further afield. Consider Japanese manufacturer Komatsu Ltd. (KMTUY), which makes construction, mining and forestry equipment, as well as e-commerce giant Inc. (AMZN).

Seven top space stocks and ETFs to watch:

-- Astra Space Inc. (ASTR)

-- Lockheed Martin Corp. (LMT)

-- Virgin Galactic Holdings Inc. (SPCE)

-- Iridium Communications Inc. (IRDM)

-- SPDR S&P Kensho Final Frontiers ETF (ROKT)

-- Procure Space ETF (UFO)

-- ARK Space Exploration and Innovation ETF (ARKX)

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