The final frontier is capturing the imagination of investors. But are space ETFs a good investment? Well, that depends. And one of the major factors is how big a splashdown the forthcoming Ark Invest Space Exploration ETF makes.
The mere news of Ark filing its prospectus to launch a space ETF (under the ticker ARKX) energized speculators. Virgin Galactic (NYSE: SPCE) saw a healthy bump in share price from the announcement. So did the likes of Maxar Technologies (NYSE: MAXR) and Iridium Communications (Nasdaq: IRDM)… all of which could be potential holdings of the Ark ETF.
The excitement around this new ETF is warranted to some extent. The Ark Innovation ETF (NYSE: ARKK) became the largest actively managed ETF in 2020. And it saw returns of more than 150% in 2020.
In the process, Ark Investment Management CEO Cathie Wood has developed a cadre of dedicated fans. This is at least in part due to her appreciation for disruptive companies. Somewhat notorious for her bullish stance on Tesla (Nasdaq: TSLA), the iconoclastic CEO has set a $7,000 price target for the electric car company by 2024. And Tesla’s success has played no small role in the success of ARKK. Tesla is the fund’s largest holding.
And by all accounts, she plans to maintain this view when it comes to Ark’s pending space ETF. According to the filing, the ETF’s holdings intend to be…
leading, enabling or benefitting from technologically enabled products and/or services that occur beyond the surface of the Earth.
More Than Musk
At this point, the only thing we can be certain of is that the list of holdings won’t include Elon Musk’s other company, SpaceX. At least not until SpaceX goes public. And that doesn’t seem likely anytime soon. But it is growing increasingly likely that Musk will spin his internet satellite company (Starlink) off of SpaceX and possibly go public with that…
But speculating about the potential holdings of an ETF aren’t really all that useful. It’s much more practical to wait back and see which ones are chosen… then decide whether it warrants being invested in. After all, past performance is no guarantee of future results. Regardless of Ark’s other successful ETFs.
So, while we wait to see the makeup of ARKX, here are three straightforward space ETFs to gain some exposure to the burgeoning industry.
Three Space ETFs to Invest in Now
- IShares U.S. Aerospace & Defense ETF (Ticker: ITA)
- Procure Space ETF (Nasdaq: UFO)
- SPDR Kensho Final Frontiers ETF (NYSE: ROKT)
IShares U.S. Aerospace & Defense ETF
There’s a lot going on in the skies above Earth. Nearly 6,000 satellites are believed to be teeming in the skies above. And that number is continuing to rise. But it’s not just expensive communication satellites that are driving the rapid growth of the space economy. Another force to be reckoned with are the companies benefitting from military contracts.
This is where the iShares U.S. Aerospace & Defense ETF comes into play. This ETF tracks an index of U.S. manufacturers, assemblers and distributors of air defense equipment. In fact, Boeing (NYSE: BA) makes up nearly 20% of its weighing.
This could be useful to know for investors because Boeing is responsible for the X-37 Orbital Test Vehicle, which is the hallmark of reusable space technologies to date. Boeing is also in the midst of designing a launch system for carrying people and cargo into deep space.
The other major holding of this ETF is Raytheon Technologies (NYSE: RTX). This is worth mentioning to space enthusiasts because the company was recently awarded a contract to test the use of commercial space internet services on military aircraft. Raytheon has also been awarded massive contracts from Space Force to develop and produce anti-jam satellites. These are two major factors that make this a promising space ETF.
Procure Space ETF
This ETF with the unforgettable ticker of UFO uses a rules-based methodology to identify companies in space-based functions. In the process, investors in this will gain exposure to companies like Garmin (Nasdaq: GRMN) and ORBCOMM (Nasdaq: ORBC), which are really more space-adjacent.
That can be good news for those looking for a diversified investment. But for those looking for a pure space play, perhaps a little less so. But there are other major holdings of this ETF to balance it out. Its two largest comprise Maxar Technologies (NYSE: MAXR) and Iridium Communications (Nasdaq: IRDM).
Maxar provides earth intelligence and space infrastructure products. And among other things, Iridium provides satellite-based mobile communications and data devices for the military and intelligence community. And on top of those, Virgin Galactic Holdings (NYSE: SPCE) makes up just under 5% of its weighing… which to date is one of the purest space plays out there. All of these factors put together make UFO one of the most attractive space ETFs currently available.
SPDR Kensho Final Frontiers ETF
It doesn’t require a trek to the stars to profit from space. And while the crew aboard the USS Enterprise traveled alone, one of the best ways is to invest in space is through a multifaceted approach… one involving many teams, companies and different pieces of technology.
The lion’s share of this ETF’s holdings is concentrated on aerospace and defense. This ETF grants affordable exposure to the likes of CACI (NYSE: CACI), which is developing laser communications transmitters for use in deep space exploration. It’s also a cheap way to get hold of Teledyne Technologies’ stock (NYSE: TDY). This outfit just entered the uncooled infrared market with its acquisition of Flir. This strengthens Teledyne’s already robust lineup of imaging systems used in aerospace and defense.
This is also a cheap way to gain access to big-name players like Lockheed Martin (NYSE: LMT) and Honeywell International (NYSE: HON), both of which are providing integral aspects to space travel and safety. This makes Rocket Man, sorry, I mean the ROKT ETF, a strong space ETF to invest in while keeping your feet on the ground.
The Bottom Line on Space ETFs
The space industry is generating roughly $350 billion in revenue. But that is expected to skyrocket above $1 trillion in the coming decades. And when that happens, those who get in early in the right companies can expect to see outsized returns.
But instead of guessing who the big players are going to be five, 10 or 20 years down the road, it’s a lot easier to gain exposure to this prospering industry through a diversified space ETF. It’s the easiest way to play this growing trend. And once we know what the ARKX ETF consists of, this list may or may not require a revision.