A deadly virus is spreading across the world at an accelerating rate. Shops, restaurants and pubs have closed down. No one is allowed out of their house and the economy is collapsing. There are moments when it feels like the apocalypse. The world is ending and we are all doomed. Investors may feel the same way. Amid the carnage on the stockmarket one small category has done well – space stocks. It is almost as if people have decided to give up on this planet and try a different one instead.
Space stocks are soaring
Space exploration is a small sector, of course, but there are definite signs of life. The only pure quoted space stock is Richard Branson’s Virgin Galactic, which aims to offer the first tourist trips into space. True, its shares have been volatile. They tripled at the start of this year, then crashed even before any of us realised Covid-19 would spread beyond China. In the last week, they bounced by 50%.
There are also a couple of space exchange-traded funds (ETFs) that track a broad range of space-related companies. The aptly named Kensho Final Frontiers Fund is up from less than $160 last week to more than $185 this week. The Procure Space ETF – with the cute ticker UFO – is up by a similar amount. Other private firms are forging ahead. Blue Origin, controlled by Amazon founder Jeff Bezos, has, slightly surprisingly, been designated an “essential” company by the US government and allowed to keep operating. Tesla founder Elon Musk’s Space-X is pressing on with plans for a new rocket capable of going to both the Moon and Mars.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
There are two reasons why space companies have soared above the carnage on the stockmarket and in the wider economy. First, all the terrible news about collapsing demand, closed factories and rapidly rising unemployment doesn’t make any difference to them. They didn’t have much in the way of sales anyway. They were devoting their resources to making products that might be fantastically valuable, but not for another five or six years. A six-month shutdown is not terribly relevant one way or another.
Next, 50 years after men first landed on the Moon, a genuine “space economy” is starting to emerge with real revenues. It includes tourism, communications, mining and transport. It is getting big enough to be included in US GDP calculations and in the numbers of many other countries as well. In the US, it is estimated at $158bn, making it by far the global leader. For Canada it is estimated at $5.6bn and for Germany $3.1bn. The Space Foundation estimates the total value of extraterrestrial GDP at $419bn in 2019 with 79% of that in the private sector. In truth, given its size and rapid growth, it is surprising there is not a larger quoted sector and more interest from investors. The few who are taking the plunge are probably right to do so. It is one of the most exciting new industries around.
To infinity and beyond!
Of course, it remains to be seen whether a genuine space industry emerges, whether it is profitable and whether the investors backing it now ever make a return on their money. But there is a broader lesson here for investors. The economy may look absolutely terrible right now with uncertain prospects for recovery, but whole new industries are going to emerge.
That has been true even in the deepest depressions. After the crash of the 1870s, the railways forged ahead and new technologies based on electricity started to emerge. In the 1930s, following the Great Depression, industries such as television and electrical household appliances would later form the foundations of the post-war boom. After the crash of 2008 the app economy was just getting going, with companies such as Uber and Airbnb raising capital. This is a good time to back emerging technologies because valuations are at rock-bottom. Space may or may not turn out to be the industry of the future – but it is certain we will look back in ten years’ time and realise that something was, and it was very cheap in 2020.
-
Rightmove: Asking prices edge closer to record peakAsking prices have been driven up by the top-end of the market, Rightmove has found. But how does the situation look in your area?
-
Coventry Building Society bids £780m for Co-operative Bank - what could it mean for customers?Coventry Building Society has put in an offer of £780 million to buy Co-operative Bank. When will the potential deal happen and what could it mean for customers?
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsWe round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
