In Focus: Space
Updated: May 2
Thanks for checking out this week's In Focus, a look into a company, companies, or markets that made Wall Street's news cycle. This week we bring Space in focus.
The current investment climate for growth stocks and growth industries is on fire. Cloud computing technology has pushed Amazon’s stock to new heights and has helped Microsoft’s stock get it’s mojo back after a decade of underwhelming investors. Beyond Meat and Impossible Burger’s success with consumers has established the alternative-meat industry as a potential growth industry. Artificial Intelligence and Machine learning has helped business solution companies earn billions. Blockchain, which is still trying to figure out how it fits in to consumer and business life remains an area of massive growth potential.
There are lots of growth industries where investors can see gains that outpace the markets. However, the space industry, which represents a major opportunity for growth doesn’t make many major headlines.
The Names in Space
As an investor the more you know, the more your money grows. But what has been going on in the space industry has been boiled down to three men, Elon Musk, Jeff Bezos, and Richard Branson, and a fourth if you count President Trump’s proposed space force, which isn’t as crazy as it once seemed.
Elon Musk’s company Space X and Jeff Bezos' company Blue Origin are in a friendly (or maybe it’s unfriendly) competition of who’s space project is the best. Their billionaire space race gets most of the attention when it comes to developments surrounding the space industry, but there’s a lot going on outside of Space X and Blue Origin.
Space and Other Growth Industries for Investors http://bit.ly/2XF7ivB
For context, the website Space News reported that since 2009, 534 venture funds have invested $18 billon in space related enterprises. The Satellite Industry Association noted that in 2018 space related global revenue was $277 billion, which included ground equipment, satellite services, satellite manufacturing, and the launch industry, and this was up 3% from 2017.
Who is Spending Money on Space?
The revenues related to the space industry come from government space budgets, commercial human spaceflights, telecommunications, Earth observation, satellite manufacturing, the launch industry, and consumer and network equipment. Satellite Manufacturing alone is a $15.5 billion industry. Goldman Sachs predicts the space industry could be a $1 trillion industry by 2040.
But with all of the money being invested in the future of space, the average investor is limited to where they can invest. Many of the companies exploring the potentials of space are private. In the U.S. if you're not an accredited investor you are not able to invest in many of these private space ventures
A Semi Resolution
Richard Branson, the billionaire founder of the Virgin Group and spaceship venture Virgin Galactic announced that Virgin Galactic will be a public company by way of an investment from Chamath Palihapitiya's Social Capital Hedosophia (IPOA) fund. Virgin Galactic, whose current focus is space tourisms revealed that they've already collected $80 million in deposits from roughly 600 potential space tourists.
Smaller Player to Look Out For
So much of our attention has gone to Musk, Bezos, and Branson, that it's easy for investors to miss out on other less popular names making headway in the space industry. Peter Beck the CEO of Rocket Lab’s, the $1 billion silicon valley unicorn has plans to launch one rocket a week by 2020. According to Beck, there is a pipeline of 2600 small satellites that various companies plan to launch over the next several years. These companies will be looking to Rocket Lab and others to get those satellites into orbit.
2600 satellite’s over the next several years? What companies are going to manufacture all of these satellites? Probably one of these. Top 10 Global Satellite Manufacturer. (https://blog.technavio.com/blog/top-10-satellite-manufacturers-global-space-industry)
Right now for the average investor the exposure to space is limited to a small number of companies. Companies such as Ball (BLL), Thales S.A. (THLEF), Viasat (VSAT), Northrop Grumman (NOC), Boeing (BA), and Lockheed Martin (LMT) all offer exposure to the space industry. For investors who prefer ETFs to individual stocks there is also the Procure Space ETF (UFO).
Cool Stuff Space X is doing https://youtu.be/giQ8xEWjnBs
If you feel like you’ve missed investment opportunities in cloud infrastructure, artificial intelligence, machine learning, or alternative meat, you may want to keep the space industry high on your investment list. This industry looks to be growing slowly now, but could see rapid growth in the not so distant future.
I'm bullish on the industry as a whole and I think investors should invest in good companies with exposure to the space industry but with a long-term outlook.
This is where I leave you this week, bullish on space. Thanks for checking out this week's In Focus.
But What is the Potential for Companies in Space?
This is a great question that we've been asked when we discuss space investments, but I honestly don't know. But what I tell everyone is that in 1997 I had a PC and an internet connection, and maybe a Geocities website. I knew we would be able to buy and sell stuff online, and though I did picture smart phones or something of the type making the internet mobile, I didn't foresee the smart phone evolution sparking the app revolution, or people reworking the chatroom idea into social media sites, or cloud infrastructure. I couldn't fathom any of that in 1997 from the internet then, yet here we are 20 plus years later, light years away from a Geocities webpage. My thought is what companies are doing now in space is setting the infrastructure for what society will do in space 20 years from now.
A simple thought is internet connectivity. It's been reported 4 billion people in the world are still without reliable internet. Satellites may be able to solve this problem. The companies that discuss ventures like these, Facebook for instance would be doing a great service for the world and for their bank account. What would Facebook's stock be worth with 500 million to 1 billion more monthly active users?
What is The Seville Report
The Seville Report is our attempt to bring world class investment research to people who feel world class investment research isn't available to them. We also want to demystify the stock market for people who wouldn't normally think of putting their money in the stock market. Our research comes quarterly via our newsletter, The Seville Report. We use the website and this blog to share thoughts and ideas about the markets and different companies.