How To Invest In Space Exploration
Space exploration has been a hot topic lately, with more than 50 nations actively developing space programs. Some of those nations, including Russia, China and Japan, are increasingly eyeing lunar resources. These nations are striving to develop viable technologies to enable the harvesting of the moon’s natural resources, thought to include an estimated 1.6 billion tons of water ice, assorted rare elements and mineral deposits.
The United States, however, is not among the nations currently competing for access to those resources. Space travel has been a bit of a challenge for American astronauts since the 2011 shut down of the National Aeronautics and Space Administration (NASA) space shuttle program. Without their own shuttle, American astronauts have to hitch a ride with the Russians to get to the International Space Station (ISS).
The U.S. pays Russia $71 million a person for the privilege, more than three times what Russia charges other people making the same trip, according to a 2014 CNN report. And, in true ‘frenemy’ fashion, Russia has no problem reminding the U.S. that a privilege can be rescinded.
“After analysing [sic] the sanctions against our space industry, I suggest the US delivers its astronauts to the ISS with a trampoline,” Russian Deputy Prime Minister Dmitry Rogozin commented in 2014 via Twitter after being targeted by U.S. sanctions in relation to the Crimean situation, offering a pointed, public and rather snarky reminder to the U.S. of its space travel dependency.
American astronauts have not yet had to resort to the trampoline. Russia is still taking about $400 million annually to transport American astronauts to the ISS. However, Russia probably shouldn’t get too accustomed to that extra income. This recent era of U.S. space travel dependency may very well be drawing to a close. A newly released three-phase NASA plan to put people on Mars indicates a new, ambitious day is dawning for American space exploration.
Investors And Industry Leaders See Opportunities
At the Fortune Most Powerful Women Summit on October 13 in Washington, D.C., Lockheed Martin CEO and president Marillyn Hewson expressed her opinion that Mars absolutely represents a real business opportunity and she’s not the only industry and business leader to think so. PayPal co-founder Elon Musk, who is also a co-founder and current CEO of Tesla Motors, is seriously invested in the concept of Mars as a major opportunity.
In 2002, Musk founded SpaceX, a space transport services and aerospace manufacturing company. His goal is to manufacture cost-efficient, reusable rockets, decreasing the cost of space travel and facilitating his much wider vision for Mars, a vision that includes human colonization of the red planet and mass migration. Musk is making progress toward that goal, garnering important contracts with NASA after successful launches.
SpaceX has experienced significant growth since 2002, counts Google and Fidelity among its major billion dollar investors and is currently worth about $12 billion. And, SpaceX isn’t the only non-governmental, private industry space flight company currently in operation. Virgin Galactic, Blue Origin, founded by Jeff Bezos of Amazon fame, and Stratolaunch Systems are just a few of the other aerospace upstarts to challenge industry giants, such as Boeing and Lockheed Martin.
While rocket launches and space ships do tend to monopolize space industry headlines, there are a variety of other companies producing products and services related to space exploration. Bigelow Aerospace focuses on developing space housing and Planetary Resources, Inc. is working toward mining asteroids for minerals, rare metals and other valuable substances. There are a number of companies specializing in space travel needs, such as space suits, food and assorted other supplies.
Space exploration seems to be well on its way to becoming a booming business, with plenty of opportunity for the well-informed investor. In 2013, for example, the public aerospace companies that make up the U.S. Space Foundation Index (SFI) did well enough that the SFI out-performed the more traditional Standard & Poor’s 500-stock index by about 8 percent, according to information from Bank of America.
Naturally, investing in space exploration should be categorized as an alternative investment and a risky one at that. Although risk can be reduced via careful investment strategies, costly technological malfunctions and mechanical failures do occasionally happen, especially when developing new technologies. Sometimes weather can have a costly impact on equipment or launch and landing plans. Risk is always present. Therefore, only invest what you are financially and emotionally comfortable with losing.
Buy Stocks In Aerospace Companies
One of the most direct ways to invest in space exploration is to buy stocks in aerospace companies. Many of these companies, including Lockheed Martin and Boeing, are also active in the defense industry. The U.S. Space Foundation Index (SFI) is a great place to start researching and learning about individual companies and their overall performance. As always, past performance is not indicative of future performance. For the big picture investor, there are also global investment opportunities, because many nations are seeing space industry growth.
Not everybody is interested in investing in the defense industry. Investors looking for companies that are focused purely on space travel and exploration may want to consider smaller companies, such as Orbital ATK Inc. (OA). Another, albeit riskier, option is to seek out crowd-funding investment platforms and opportunities as a means of directly investing in space travel and exploration focused companies. Before buying shares or equity in such projects, well-informed, in-depth due diligence is essential.
Invest In Supporting Industries
As the space industry experiences growth, so also do the supporting industries working to meet increased demand for their products. There is a broad range of products and services that support the space travel and exploration industries, ranging from companies producing mechanical parts and materials required in the building of space craft to factories that manufacture space suits to those supplying specialized rocket fuel.
Increase your opportunity to make successful investment decisions by closely following industry news. Study the companies that have scored important contracts with NASA and other major aerospace industry players. Make note of contract details, including what they will be providing, for how long and for how much. There’s a lot of wheeling and dealing going on in the industry. Keeping up with the details gives you a bit of a heads up on which companies can be expected to make money over the next quarter or the next year and what share prices may look like over time.
Investment Funds Can Decrease Individual Risk
Even with the best of research, investing in space exploration is still a risky business. Aerojet Rocketdyne Holdings Inc. has lost all of this year’s earnings due to a $50 million settlement in connection with the company’s October 2014 rocket explosion. In addition to the dramatic loss of the rocket, that explosion also did $15 million worth of damage to the Wallop Island launch pad it took off from. SpaceX lost a rocket this past June when it exploded in mid-air, less than three minutes after launch.
Investment funds are a good way to reduce the risks associated with investing in space exploration. With multiple investors pooling their money and investing in multiple companies, individual exposure to risk can be significantly decreased. The losses of an individual company are often offset by the gains of another. Ideally, the gains more than off-set losses, yielding a worthwhile return on the initial investment.
Those more comfortable investing with a big, well established name may be interested in more traditional sorts of managed funds. For example, Fidelity, a recent SpaceX investor, offers a defense and aerospace fund with a solid rate of return record. Over the past 5 years, the fund provided a 16.5 percent annualized rate of return. Investors with a bit more of an adventurous nature may choose to investigate the potentials of some of the smaller, newer space investment groups, like Great Britain’s Space Ventures Investors.
Founded in 2009 and quite tightly focused on space related investing, Space Ventures investors offers a mixed bag of investment opportunities, including long-term and short-term investments, as well as traditional investment opportunities and new fintech opportunities, such as crowd-funding and peer-to-peer. There are a number of these smaller investment groups specializing in a sort of democratization of aerospace investing.
Private Industry Key To Space Exploration Future
In the early days of space exploration, government agencies were the primary drivers of technological achievement and space program expansion. That is no longer the case. Between 2008 and 2013, the global space economy experienced a growth rate of 27 percent. By 2014, the space industry growth pushed the value of the industry up to $330 billion. The commercial activities of private industry are responsible for 76 percent of that value.
There are about 800 companies currently involved in the industry and an estimated $10 billion will be invested in this sector this year alone. In other words, private industry has stepped in, filling the gap of decreased government spending with business capital and investment funds, stimulating growth and the rapid development of ever more sophisticated technologies. If mankind does harvest lunar resources, mine asteroids and colonize Mars, we’ll have private industry, not government, to thank for it.