Space-related businesses are constantly reaching new heights in communications, aerospace, defense, and exploration. Now looks to be a great time to own this growing industry. Fortunately, space exchange-traded funds (ETFs) make it possible to obtain an out-of-this-world portfolio at a price point firmly grounded on Earth. Read on to check out our favorite and best space ETFs to pick up right now.
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Best Space ETFs
SPDR S&P Kensho Final Frontiers ETF (NYSEARCA: ROKT)
The SPDR Kensho Final Frontiers ETF (ROKT) looks to push its share price to the final frontier by investing primarily in communication, aerospace, and defense companies. With 34 holdings, the S&P Kensho Final Frontiers has a diverse portfolio to gain exposure and grow. The expense ratio is about 0.45%.
This fund follows the Kensho Space Index, which focuses on space-related industries developing means of space travel and future exploration. The result is an ETF with 56% weight in aerospace and defense.
Top holdings include Lockheed Martin (LMT), Northrop Grumman (NOC), and L3Harris Technologies (LHX), making up about 15% of the total fund. It also contains several satellite communications, services, and infrastructure companies such as Maxar Technologies (MAXR) and Iridium Communications (IRDM). According to StockRover*, Industrials make up about 65% of the fund, most of which are aerospace and defense companies.
Lockheed Martin is a well-established aerospace and defense company with many years of experience designing advanced military aircraft, munitions, missiles, rockets, etc. More recently, it has partnered with the United States Space Force to develop technologies to protect the world from orbit. The company is also one of the best dividend growth stocks due to its status as a Dividend Contender, dividend safety, and strong balance sheet.
Northrop Grumman similarly looks to the stars to meet the growing needs of the world. In addition to defense spending, Northrop is one of the few aerospace and defense companies involved in furthering our reach into space. The company produces rockets, missiles, satellites, interceptors, and more.
L3Harris Technologies is an expert in using artificial intelligence with autonomous systems in the sky and deep-sea exploration. Above the atmosphere, L3Harris uses global positioning systems for defense and looking into deep space. In addition, the company builds sensors, payloads, electronics, and avionics for airborne and space platforms.
SPDR S&P Aerospace & Defense ETF (NYSEARCA: XAR)
The second ETF on this list of best space ETFs is The S&P Aerospace & Defense ETF (XAR), as close to a pure space play as you can get in this thematic ETF sector. One hundred percent of its net assets are invested in 31 aerospace and defense companies. If that wasn’t enough incentive, its expense ratio is only 0.35%.
Several of these companies have impressive performance data stemming from years of work on this side of the ozone layer. To keep up with ever-evolving technology, they also look to the space industry. Some of the top fund holdings are Mercury Systems (MRCY) at 5.50%, Lockheed Martin at 5.17%, and Northrop Grumman at 4.77%.
Mercury Systems continues to receive accolades for its work in defense despite being considerably smaller than other companies involved in the same sector, with a market capitalization of only ~$3.73 billion. Mercury’s effort is to bring forth a new space economy with its technologically enabled products. The company designs and manufactures electronic components and systems in defense and intelligence applications. Many of Mercury Systems’ electronics are found in UAVs and space platforms.
iShares U.S. Aerospace & Defense ETF (BATS: ITA)
iShares U.S. Aerospace & Defense (ITA) is another fund in the space ETF race that invests primarily in aerospace and defense activities. It is the third ETF on the list of best space ETFs. Most of the companies involved in this fund deal with one or more segments of aircraft manufacturing or in defense-related products. The expense ratio is 0.42%.
Like most space-related ETFs, iShares carries fewer holdings due to limited investment opportunities. As a result, it’s hard to say if the number of holdings will increase over time, but the fund invests in 33 at present. According to StockRover*, Raytheon Technologies Corp (RTX) makes up 22.9% of the ETF, with Boeing (BA) and Lockheed Martin (LMT) following at 16.9% and 5.0% accordingly.
Raytheon Technologies helps lead the way with transformative projects on Earth and beyond. The company was formed through the merger of Raytheon and United Technologies. The company played a crucial role in the latest Mars rover landing and plans to provide integral support on future crewed missions there. In addition, Raytheon provides Pratt & Whitney jet engines and parts and sub-systems of aircraft. The company also makes sensors, missiles, missile defense, and other products.
Boeing is well-known for its fleet of aircraft models that take to the skies each day. Similarly, it has been part of every significant US mission into space. Boeing makes missiles, launch vehicles, satellites, and space probes. Boeing also makes the 737, 767, 777, 787 commercial aircraft platforms. In addition, it produces manned and unmanned military aircraft, including the B-52, Apache AH-64, V-22 Osprey, F-15, F/A-18, C-17, and more.
Space Exploration ETFs
We include this section about space exploration ETFs for completeness. However, these ETFs are riskier, more volatile, and more expensive than those listed above. They are not necessarily amongst the best space ETFs but may be attractive to some investors.
ARK Space Exploration & Innovation ETF (NYSEARCA: ARKX)
The ARK Space Exploration and Innovation ETF (ARKX) invests primarily in domestic companies but leaves up to 20% for foreign equity securities. This relatively new ETF had its inception date on March 30th of last year, the latest endeavor from market influencer Cathie Wood’s Ark Invest. Investors who are not comfortable with volatility should probably not invest in ARKX. Additionally, the fund has a high expense ratio of 0.75%.
ARKX ETF is a mix of aerospace companies and enabling technology companies that provide the means to advance space exploration. This actively managed ETF currently represents 35 companies, with Trimble at 8.97% (TRMB), Kratos Defense and Security at 8.65% (KTOS), and L3Harris Technologies at 7.52% (LHX) being the top holdings.
Trimble is known for its success in agriculture and construction guidance and positioning, software for route selection, surveying, geospatial systems, and more. The company also branched into government and natural resources. It is also a big player in developing means to colonize other planets through partnerships with Elon Musk’s SpaceX and NASA.
Kratos Defense & Security Systems specializes in satellite communications, cybersecurity, microwave electronics, unmanned systems, and missile defense. Kratos is smaller than most other aerospace & defense companies with a market capitalization of only ~$2.49 billion.
Procure Space ETF (NASDAQ: UFO)
Procure Space ETF (UFO) uses the S-Network Space Index as a guide, seeking to mirror its performance. The fund chooses companies from this underlying index that generate at least half of their revenue from space-related businesses. Like ARKX, this ETF is volatile and has a high expense ratio of 0.75%.
Despite the clever ticker, the individual stocks in this ETF reach far beyond space exploration-related companies. Names like Garmin (GRMN) and Sirius XM (SIRI) make the list of 43 holdings. Procure Space is one of the few to list Richard Branson’s space tourism giant Virgin Galactic Holdings (SPCE), but at only a 2.41% weighting.
Some of the holdings at the top of this ETF are Maxar Technologies (MAXR) at 6.05%, SES S.A. (SGBAF) at 5.86%, and Viasat (VSAT) at 5.60%.
Maxar Technologies has dealt in satellites for the last 60 years, helping create the infrastructure to send astronauts to the moon. Today the company provides intelligence data and geospatial information to the US government. Maxar also provides space-based infrastructure, satellites, robotics, support services, etc.
SES S.A. is a Luxembourg company that serves as a leader in providing high-performance video and data solutions to the world at large. It is responsible for over 70 satellites that can reach almost every corner of the globe.
Viasat is a global communications company providing satellite broadband internet access to places cable and fiber can’t go. Its satellite services reach nearly 600,000 Americans each year. In addition, the company offers services to ships, cruise lines, aircraft, and more.
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A Little About ETFs
Exchange-traded funds offer a way for investors to get a piece of several publicly-traded stocks with a single purchase. Thematic ETFs make it possible to invest in a specific sector that is or has the potential to do well. It is worth noting that there’s no ownership of individual stocks within an ETF.
ETFs trade just like stocks do and can be bought or sold any time the market is open. With a diverse portfolio of securities, these funds are designed to weather fluctuations from business to business and generate long-term growth.
Investing in an active or passive ETF often boils down to risk tolerance. Unlike stocks, ETFs are often tied to an index (such as the Dow Jones U.S. Select Aerospace & Defense Index) and track the Index. Actively managed ETFs strive to do better than the underlying index, while passive ones tend to stay close to the index’s benchmark.
Should You Invest in Space ETFs?
ETFs, in general, speak to those looking for long-term projected growth and diversification. They will likely not appeal to anyone looking for quick gains.
These funds are also a way for newer investors to grab some higher-priced stocks for significantly less. For example, the iShares US Aerospace & Defense ETF is currently trading at just over $100. The fund’s number two holding, Boeing, now sells for nearly $180 per share.
Our world of communications relies extensively on satellites, and trips to the Moon and Mars draw closer every day. But, let’s not forget the budding space tourism industry and the possibilities there. With a stronger push to pursue the final frontier every year, companies are investing more and more into their space programs.
Where to Buy Space ETFs?
Because a space ETF trades much the same as a traditional stock, you can acquire them on almost any stock trading platform. For instance, Tornado* (formerly known as Nvstr) has stocks and ETFs from US stock exchanges. The platform combines structured social media with an investing platform. Exchange-traded funds are most likely to appear on major stock exchanges like the NASDAQ or the New York Stock Exchange (NYSE).
Best Space ETFs: Final Words
The space industry is still very much in its infancy, and the possibilities are endless. Whether we see a colony on Mars or not in the near future remains to be seen, but we rely more and more on outer space technology to keep up with our ever-changing world.
Space ETFs are an excellent option for getting involved in this lucrative sector without having to break the bank in the process. Many space-related companies have higher share prices from decades of growth, but an ETF delivers a piece of each for one reasonable price. Space exploration ETFs are riskier and more volatile. However, several of the best space ETFs focus on more established aerospace and defense companies with space businesses. The funds often own some of the riskier companies but in smaller percentages.
Thanks for reading The 5 Best Space ETFs!
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Author Bio: Noah Zelvis is an American copywriter on a mission to help clarify the nuances of the financial world. He is on staff with The Stock Dork, where you’ll frequently see him making stock picks and evaluating services. When he’s not working, you’ll likely find him running or traveling.
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
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Published at Fri, 25 Mar 2022 04:00:00 -0700
