• April 14, 2024

How to Invest in Satellite Technology

T.he successful start from The Sputnik 1 – the first man-made satellite put into orbit by the Soviet Union in 1957 – marked the beginning of the space age and space race between the US and the USSR. Space technology has developed rapidly in these decades.Other nations – China, Japan, India, Great Britain, Canada, Luxembourg, Germany, Spain, Argentina – have contributed to the further development of satellite technology together with the USA and Russia (the former USSR). With reduced rocket and satellite costs, companies in various countries are playing an increasingly important role in what was once a highly bureaucratic, monopolized industry.

Here’s a look at the satellite industry and how investors can be a part of it.

There are more and more satellites today than ever before. The Data Compiled by experts from the Union of Concerned Scientists (UCS), reports that there are currently more than 3,000 operational satellites in orbit around the earth, with the number expected to increase many times over in a decade. The US currently tops the list with the highest number of satellites in operation, followed by China and Russia.

According to the Satellite Industry Association (SIA), the satellite industry accounts for nearly 75% of the space economy. The Estimates from Morgan Stanley propose that the global space industry could have sales of more than $ 1 trillion or more in 2040, up from $ 350 billion (2020 forecast). Global satellite industry sales include segments such as ground equipment (48%), satellite services (45%), satellite manufacturing (5%) and launch industry (2%).

Satellites orbiting hundreds and thousands of kilometers in the sky have ushered in technological, scientific, and military advances. They play a bigger role in our lives than we think – from entertainment to information and to keep us safe and informed. The future will depend more on advanced satellites. The satellite broadband internet access segments are seen as the growth drivers in the industry as the demand for connectivity begins to increase in low-penetration countries and more bandwidth is required alongside the adoption of advanced technologies such as artificial intelligence, virtual reality and cloud computing. and their applications (autonomous cars, streaming, medical procedures, navigation, drones and much more).

Opportunities to invest

One of the easiest and most efficient ways to invest in the booming future of satellite and space technology is with Exchange Traded Funds (ETFs).

Launched in 2019, Procure Space ETF (UFO) provides contact with companies that are active in space-related industries. The ETF tracks the S-Network Space Index. The index is structured so that at least 80% of the index weight is assigned to companies that derive a large part of their revenue from space-related industries, including companies that use satellite technology. The ETF covers topics such as the manufacture of ground equipment depending on satellite systems, the manufacture and operation of rockets and satellites, satellite telecommunications, and radio and television broadcasts. While 70% of its assets are concentrated in the US, the ETF provides some geographic diversification by investing in France, Japan, Italy and Israel. The fund has $ 43.25 million under management and an expense ratio of 0.75%. The top ten positions are:

Next comes the SPDR Kensho Final Frontiers ETF (SMOKE)chasing the S&P Kensho Final Frontiers Index. Launched in October 2018, the fund offers an effective way to unlock long-term growth potential by investing in a portfolio of companies involved in expanding human understanding and presence in space and the oceans. The S&P Kensho Final Frontiers Index is heavily biased towards the aerospace and defense sectors and represents approximately 65% ​​of the fund’s holdings. The fund offers a different approach to investing in the satellite and space sectors with companies from research and advisory, industrial conglomerates, industrial machinery, industrial manufacturing services and semiconductors. The fund’s top positions are:

  • Maxar Technologies (MAXR)
  • Hexcel (HXL)
  • Boeing (BA)
  • Aerojet Rocketdyne (AJRD)
  • Raytheon Technologies (RTX)
  • Virgo Galactic (SPCE)
  • Northrop Grumman (NIGHT)
  • L3Harris Technologies (LHX)
  • CACI International (TO THE)

ARK Investment Management will shortly launch its ETF. ARK has already applied for approval from the ARK Space Exploration ETF (ARKX). after that submissionThe ARK Space Exploration ETF will be an actively managed ETF that invests (at least 80% of assets) in domestic and foreign companies dealing with the fund’s investment theme, space exploration and innovation. The term “space exploration” is defined as “leading, enabling or benefiting from technologically activated products and services that occur beyond the surface of the earth”.

Disclaimer: The report has been carefully prepared and any exclusions or errors therein are wholly unintentional. The author has no position in the stocks mentioned.

The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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