As the new space race gets going in earnest, space tourism is in the headlines.
Sir Richard Branson’s Virgin Galactic Holdings Inc. plans to start commercial flights next year. Branson was aboard the inaugural Virgin Space Ship (VSS) Unity flight to the edge of the atmosphere in July. Since then, the company has decided to offer flights beginning next year. It is selling tickets starting at US $450,000 a seat.
Image courtesy: Virgin Galactic spaceship seats rotated back in space, Oct. 15, 2021. (Virgin Galactic Photo via AFP)
Branson’s milestone was followed nine days later by Amazon Inc.’s Jeff Bezos whose Blue Origin space program competes with Branson. Blue Origin plans two more paying flights this year but has not committed to commercial service beyond that.
And for those wishing for a little longer stay a California company, the Gateway Foundation, has an ambitious plan to build a space hotel with room for 400 people by 2027. It will have a rotating wheel to create gravity and offer such amenities as a health spa, cinema and gym along with lounges for a viewing the Earth. It has indicated that it would like to work with Tesla’s Elon Musk and his Space X program.
While space travel is capturing public imagination, it is just one of three areas of opportunity for investors interested in this sector. Space construction, which includes subcontracts for the crafts and components, is much larger as is satellite communications in all its forms. The latter is needed for 5G communications and growing global demand for the internet.
Global manufacturers and aerospace companies are playing a bigger role exploring inner and outer space as governments are turning the nuts and bolts over to them.
Tech titans like Branson and Bezos are joining Musk to develop landers and spacecraft and are forming partnerships with defence and aerospace multinationals for propulsion systems, electronic operating systems and the launch and maintenance of satellites. NASA recently awarded SpaceX a US $2.9 billion contract to build a lander that will return humans to the Moon this decade.
This potential led Harvest Portfolios Group to launch Canada’s first index-based industry exchanged traded fund (ETF) in March. The Harvest Space Innovation Index ETF (TSX: ORBT) invests in 40 large global companies engaged in the development of products and services related to satellites, space flight, space stations and space tourism. It follows an index designed by Solactive AG and has a 0.50% management fee.
About 40% are mega cap stocks valued at over $10 billion. Another 40% are between $1 billion and $10 billion and the remaining 20% are between $100 million and $1billion.
At least six are NASA contractors:
- Northrup Grumman Corp. has developed a system that enabled a satellite to grab holdof another satellite and move it back into place. As more satellites are launched, repairing them is becoming a priority.
- Raytheon Technologies Corp. makes satellite command-and-control systems as well as spacecraft components. The Mars Rover uses Raytheon’s optical systems to view the landscape as it moves. A Raytheon assembly within the Rover serves up the drill bits it uses to mine the surface.
- AerojetRocketdyne Holdings was recently awarded a NASA contract to investigate designs for a spacecraft to shuttle between the Moon’s surface and an orbiting craft as part of the Space X contract.
- Lockheed Martin Corp. worked with NASA on the Mars mission and is involved in building the reusable Orion space capsules. It is a partner with Jeff Bezos’ Blue Origin program.
- Honeywell Corp. engineers are working with NASA to develop and test an advanced low-pressure turbine.
- Boeing Inc. has been a NASA partner since the agency’s inception in 1958. The company or those it acquired built the capsules that took Apollo astronauts to the moon. It built the space shuttle and helps operate the International Space Station.
Paul MacDonald, Chief Investment Officer of Harvest Portfolios Group told advisors in a recent webinar the space sector’s prospect can only improve. While investors often ask whether it is pie in the sky, he believes it is quite the opposite. It is less about governments and more about companies delivering services for a new industry.
For more on Harvest ETFs click here.