Issue 26: 2014

Future Perspective

Investing in Space Travel

Interested in opportunities in the aerospace industry? Here's where to start.

Photograph by Andy Ryan

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With the U.S. aerospace industry in an apparent expansion, should you consider adding space-related companies to your investment portfolio? We asked Joe Quinlan, U.S. Trust’s chief market strategist, to weigh in on a range of topics, including investment potential and possible risks.

Investment potential:

Space is probably not at the top of most investors’ lists. Still, some clients might be intrigued to learn that not only is there an index of U.S. public aerospace companies — the Space Foundation Index (SFI) — but also that in 2013 it outperformed Standard & Poor’s 500-stock index. (In 2013, SFI rose 37.8% versus the S&P 500’s 29.6% rise.)

Risks:

Undoubtedly the space industry is open to some fairly unusual risks. Bad weather or a defective part can delay a mission — or worse. A manned flight can raise the cost involved, because of the need to add safety systems. It’s a capital-intensive industry, requiring lengthy test periods in difficult environments.

Public Companies:

Many of the large aerospace corporations have been NASA contractors for decades and are traded on public stock markets. At the same time, they are often involved in the manufacturing of commercial jets, advanced weaponry, communication systems and so forth. As such, they might not fit the bill for investors looking for “pure-plays” on space.

Private Companies:

The private arena is a hotbed of innovation today. One of the few investment opportunities in this category is private equity. Investors should watch for space-related initial public offerings.

Space tourism:

Only a handful of private individuals have traveled to space. Still, with several start-ups now testing shuttle-like crafts, and with at least one taking reservations for planned flights, space tourism could in time become a viable aspect of the aerospace industry.

Spin-offs:

One way to invest in space, albeit at a distance, is through the manufacturers of products that use NASA know-how. At spinoff.nasa.gov, the agency lists hundreds — items as diverse as artificial hearts, rescue tools, home insulation, prosthetics, infrared cameras and exoskeletons for paraplegics.

Future Times:

Orbiting hotels seem likely, although perhaps not in this decade. We could someday see companies mining asteroids for minerals that are rare or depleted on Earth. NASA or private companies could develop as-yet-unimagined products and processes that benefit society.

Bottom line:

Perhaps the most direct way of investing in the commercialization of space is through large aerospace corporations. Private equity investment in space start-ups is another option. Investors should keep an eye out for private space companies that go public. Companies that make products using NASA technology are a means to invest in space, albeit from a distance. We think that within 10 years we could see a wider range of investment opportunities for those who want to enter space through their portfolios.

Prominent Names in Space (Public) Click to expand
Prominent Names in Space

Public

  • Boeing Co. (Stock Symbol: BA)
    Industries: Aerospace, commercial aircraft, defense.
    Highlights: Saturn rockets, space shuttle, parts of ISS, satellites.
  • Lockheed Martin (LMT)
    Industries: Aerospace, defense, information technology, robotics.
    Highlights: Atlas rockets, Trident missiles, space shuttle.
  • Northrop Grumman Corp. (NOC)
    Industries: Aerospace, missile defense, robotics.
    Highlights: Space telescope, unmanned aircraft, lunar module.
  • Orbital Sciences Corp. (ORB)
    Industries: Aerospace, spacecraft, communications satellites.
    Highlight: Supply delivery to ISS under NASA contact.
  • Raytheon (RTN)
    Industries: Global positioning systems, missile defense, radar, cybersecurity.
    Highlight: Developing next-gen GPS.
Prominent Names in Space (Private) Click to expand
Prominent Names in Space

Private

  • Virgin Galactic
    Industries: Space tourism.
    Start-up Info: Founded in 2004 by Richard Branson, co-founder of Virgin Group.
    Highlights: Testing SpaceShip concept. Taking reservations for space trips.
  • Blue Origin
    Industries: Rocket development, space tourism.
    Start-up Info: Founded in 2000 by Jeff Bezos, CEO of Amazon.
    Highlights: Testing hydrogen-fueled rockets, vertical take-off and landing technology.
  • Space Exploration Technologies (AKA Space X)
    Industries: Rocket development, space exploration.
    Start-up Info: Founded in 2002.
    Highlights: Flew to ISS under NASA contract. Developing reusable rocket engines.
  • Sierra Nevada
    Industries: Crewed spacecraft development.
    Highlight: Developing Dream Chaser shuttle craft.
  • Stratolaunch Systems
    Industries: Aerospace, space tourism.
    Start-up Info: Co-founded in 2011 by Microsoft Corp. co-founder Paul Allen.
    Highlight: Testing the use of aircraft to launch spacecraft.
  • XCOR Aerospace
    Industries: Aerospace.
    Start-up Info: Co-founded in 1999 by Jeff Greason, former Intel employee.
    Highlight: Testing Lynx rocket plane.
Prominent Names in Space (Other) Click to expand
Prominent Names in Space

Other

  • Mars One
    Nonprofit organization
    Industries: Settlement of Mars.
    Start-up Info: Program initiated in 2010. Bas Lansdorp, CEO.
    Highlights: Use of crowdsourcing and online applications.
  • Google Lunar X Prize
    Sponsorship from Google (GOOG)
    Industries: Prize for passing milestones on the moon.
    Start-up Info: Announced in 2007.

For more information on investing in the aerospace industry, including some of the risks involved, and whether it is appropriate for your overall investment strategy, please contact your U.S. Trust advisor.

IMPORTANT INFORMATION

Investing involves risk. There is always the potential of losing money when you invest in securities.

Projections made may not come to pass due to market conditions and fluctuations.

Past performance is no guarantee of future results. Diversification does not ensure a profit or protect against loss in declining markets.

Always consult with your independent attorney, tax advisor, investment manager and insurance agent for final recommendations and before changing or implementing any financial, tax or estate planning strategy.

OTHER IMPORTANT INFORMATION

Equities
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments.

Stocks of small and mid cap companies pose special risks, including possible illiquidity and greater price volatility, than stocks of larger, more established companies.

International Investing
International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards, and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility.

The Standard & Poor’s (S&P) 500 index tracks the performance of 500 widely held, large capitalization U.S. stocks.

With the U.S. aerospace industry in an apparent expansion, should you consider adding space-related companies to your investment portfolio? We asked Joe Quinlan, U.S. Trust’s chief market strategist, to weigh in on a range of topics, including investment potential and possible risks.

Investment potential:

Space is probably not at the top of most investors’ lists. Still, some clients might be intrigued to learn that not only is there an index of U.S. public aerospace companies — the Space Foundation Index (SFI) — but also that in 2013 it outperformed Standard & Poor’s 500-stock index. (In 2013, SFI rose 37.8% versus the S&P 500’s 29.6% rise.)

Risks:

Undoubtedly the space industry is open to some fairly unusual risks. Bad weather or a defective part can delay a mission — or worse. A manned flight can raise the cost involved, because of the need to add safety systems. It’s a capital intensive industry, requiring lengthy test periods in difficult environments.

Public Companies:

Many of the large aerospace corporations have been NASA contractors for decades and are traded on public stock markets. At the same time, they are often involved in the manufacturing of commercial jets, advanced weaponry, communication systems and so forth. As such, they might not fit the bill for investors looking for ‘pure-plays’ on space.

Private Companies:

The private arena is a hotbed of innovation today. One of the few investment opportunities in this category is private equity. Investors should watch for space-related initial public offerings.

 

Space tourism:

Only a handful of private individuals have traveled to space. Still, with several start-ups now testing shuttle-like crafts, and with at least one taking reservations for planned flights, space tourism could in time become a viable aspect of the aerospace industry.

Spin-offs:

One way to invest in space, albeit at a distance, is through the manufacturers of products that use NASA know-how. At spinoff.nasa.gov, the agency lists hundreds — items as diverse as artificial hearts, rescue tools, home insulation, prosthetics, infrared cameras and exoskeletons for paraplegics.

Future Times:

Orbiting hotels seem likely, although perhaps not in this decade. We could someday see companies mining asteroids for minerals that are rare or depleted on Earth. NASA or private companies could develop as-yet-unimagined products and processes that benefit society.

Bottom line:

Perhaps the most direct way of investing in the commercialization of space is through large aerospace corporations. Private equity investment in space start-ups is another option. Investors should keep an eye out for private space companies that go public. Companies that make products using NASA technology are a means to invest in space, albeit from a distance. We think that within 10 years we could see a wider range of investment opportunities for those who want to enter space through their portfolios.

For more information on investing in the aerospace industry, including some of the risks involved, and whether it is appropriate for your overall investment strategy, please contact your U.S. Trust advisor.

Prominent Names in Space (Private) Click to expand
Prominent Names in Space

Private

VIRGIN GALACTIC Industries: Space tourism. Start-up Info: Founded in 2004 by Richard Branson, co-founder of Virgin Group. Highlights: Testing SpaceShip concept. Taking reservations for space trips.

BLUE ORIGIN Industries: Rocket development, space tourism. Start-up Info: Founded in 2000 by Jeff Bezos, CEO of Amazon. Highlights: Testing hydrogenfueled rockets, vertical take-off and landing technology.

SPACE EXPLORATION TECHNO LOGIES (AKA SPACE X) Industries: Rocket development, space exploration. START-up Info: Founded in 2002. Highlights: Flew to ISS under NASA contract. Developing reusable rocket engines.

SIERRA NEVADA Industries:Crewed spacecraft development. Highlight: Developing Dream Chaser shuttle craft.

STRATOLAUNCH SYSTEMS Industries: Aerospace, space tourism. Start-up Info: Co-founded in 2011 by Microsoft Corp. co-founder Paul Allen. Highlight:Testing the use of aircraft to launch spacecraft.

XCOR AEROSPACE Industries: Aerospace. Start-up Info: Co-founded in 1999 by Jeff Greason, former Intel employee. Highlight: Testing Lynx rocket plane.

Prominent Names in Space (Public) Click to expand
Prominent Names in Space

Public

BOEING CO. (Stock Symbol: BA) Industries: Aerospace, commercial aircraft, defense. Highlights:Saturn rockets, space shuttle, parts of ISS, satellites.

LOCKHEED MARTIN (LMT) Industries:Aerospace, defense, information technology, robotics. Highlights: Atlas rockets, Trident missiles, space shuttle.

NORTHROP GRUMMAN CORP. (NOC) Industries:Aerospace, missile defense, robotics. Hightlights: Space telescope, unmanned aircraft, lunar module.

ORBITAL SCIENCES CORP. (ORB) Industries: Aerospace, spacecraft, communications satellites. Highlight: Supply delivery to ISS under NASA contact.

RAYTHEON (RTN) Industries: Global positioning systems, missile defense, radar, cybersecurity. Highlight: Developing next-gen GPS.

Prominent Names in Space (Other) Click to expand
Prominent Names in Space

Other

MARS ONE Nonprofit organization Industries: Settlement of Mars. Start-up Info: Program initiated in 2010. Bas Lansdorp, CEO. Hightlights: Use of crowdsourcing and online applications

GOOGLE LUNAR X PRIZE Sponsorship from Google (GOOG) Industries: Prize for passing milestones on the moon. Start-up Info: Announced in 2007.