Invest in space: the final frontier for investors
Matthew Partridge takes a look at how to invest in space, and explores the top stocks to buy to build exposure to this rapidly expanding sector.
There’s never been a better time to invest in space.
The space industry has until recently been seen as the domain of government space agencies and “the odd eccentric billionaire who had got the yacht and wanted something a bit different”, says Ben Baseley-Walker of space consultancy Andart Global, one of the leading industry experts.
However, rapid technological change has fundamentally altered the picture. The sector can now generate enough revenue to capture the attention (and wallets) of even “boring bankers”.
With applications ranging from communication to space exploration and mining, the future of space technology, or “spacetech”, is assured. The industry is already worth around $371bn.
How to invest in space
One problem with investing in spacetech is that many of the companies are unlisted.
One way to gain access to them is through the Seraphim Space Investment Trust (LSE: SSIT), the first listed investment trust that focuses exclusively on spacetech.
It’s run by experienced venture capitalist Mark Boggett and has a range of holdings in more than one hundred companies, which are mostly in the early to mid-stages of raising money.
These cover all parts of the spacetech industry, from communications to data, but also areas such as agriculture in space. Owing to the bear market in tech stocks, Seraphim trades at an almost 50% discount to the value of its net assets, although it will be some time before this value is realised.
One of Seraphim’s holdings that has been able to reach the stockmarket is Arqit Quantum (Nasdaq: ARQQ). The growing amount of data produced by satellites increases the need for reliable encryption.
Arquit’s system can mass-produce encryption systems able to withstand the advances in computing power that threaten to break even the most complex codes, even from possible attacks by a quantum computer.
Arqit’s revenue is already growing exponentially, more than tripling between 2022 and 2023. Viewed in this light the stock’s valuation of 27 times 2023 earnings looks reasonable.
An alternative to Seraphim that focuses on listed rather than private companies is the Neuberger Berman Next Generation Space Economy fund. It was launched by Michael Barr and Hari Ramanan earlier this and focuses on firms that will benefit from the growth of the space economy, especially those involved in creating space infrastructure.
Its holdings range from large aerospace and telecommunications companies such as Teledyne Technologies, Motorola Solutions and Airbus to smaller, dedicated firms. Despite its specialised nature, it has a relatively moderate ongoing charge of 1.05%.
A way to invest in space directly
One of Neuberger’s major holdings is Rocket Lab USA (Nasdaq: RKLB). Rocket Lab is already known as one of the leading providers of low-cost satellite launches.
However, in an attempt to boost revenue further and diversify its business into higher-margin areas, it is now starting to help companies design, repair and replace their satellites, as well as work on building its own constellations of satellites.
While the company isn’t yet profitable, it has plenty of cash. Strong ongoing relationships with the US government add a degree of security.
Maxar Technologies (NYSE: MAXR) focuses on using satellites to provide Earth-monitoring services to a variety of governmental, non-governmental and commercial organisations.
These include the US military and intelligence services, but also humanitarian and disaster-response agencies, the shipping and mining industries, and conservationists.
It is working on developing cutting-edge mapping tools, which will use the data its satellites produce to create detailed 3D-maps. Unlike many spacetech companies, it is already profitable and trades at only 15.5 times 2023 earnings. It even pays a small dividend.