Technology

How to Invest in Satellite Technology

Rendering of a satellite orbiting earth
Credit: Jose Luis Stephens - stock.adobe.com

The successful launch of The Sputnik 1—the first artificial satellite to be placed in orbit around the Earth by Soviet Union in 1957—marked the beginning of the space age and the space race between the U.S. and the U.S.S.R. Over these decades, space technology has evolved rapidly and more nations—China, Japan, India, UK, Canada, Luxembourg, Germany, Spain, Argentina—have joined the U.S. and Russia (the former U.S.S.R) in contributing to the advancement in satellite technology. With reduced rocket and satellite costs, companies across nations 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 in obit today than ever before. The data compiled by experts at the Union of Concerned Scientists (UCS) reports that there are more than 3,000 operational satellites currently in orbit around Earth, with the number expected to go up multiple times in a decade. The U.S. currently leads the tally with the highest number of operating satellites, followed by China and Russia.

According to the Satellite Industry Association (SIA), the satellite industry is close to 75% of the space economy. The estimates by Morgan Stanley suggest that the global space industry could generate revenue of more than $1 trillion or more in 2040, up from $350 billion (2020 projection). The global revenue for the satellite industry includes segments such as ground equipment (48%), satellite services (45%), satellite manufacturing (5%), and the launch industry (2%).

Orbiting hundreds and thousands of kilometers away in the sky, satellites have ushered technological, scientific, and military advancements. They play a role in our lives more than we realize—from providing entertainment to information and keeping us safe and informed. The future will rely more on advanced satellites. The segments of satellite broadband Internet access are seen as growth drivers of the industry as demand for connectivity in nations with low penetration levels begins to rise and more bandwidth is needed alongside the adoption of advanced technologies such as artificial intelligence, virtual reality, cloud computing, and their applications (autonomous cars, streaming, medical procedures, navigation, drones and so much more).

Ways to invest

One of the most hassle-free and efficient ways to invest in the booming future of satellites and space technology is via exchange-traded funds (ETFs).

Launched in 2019, Procure Space ETF (UFO) provides exposure to companies involved in space-related industries. The ETF tracks the S-Network Space Index. The index is constructed in a way that at least 80% of the index weight is allocated to companies that derive a majority of their revenues from space-related industries, including those companies utilizing satellite technology. Thus, the ETF captures themes such as ground equipment manufacturing dependent upon satellite systems, rocket and satellite manufacturing and operations, satellite-based telecommunications, and radio and TV broadcasting. While 70% of the assets are concentrated in the U.S., the ETF adds some geographical diversification by investing in France, Japan, Italy and Israel. The fund has $43.25 million as assets under management and an expense ratio of 0.75%. The top ten holdings are:

  • Loral Space and Communications (LORL)
  • ViaSat (VSAT)
  • Gilat Satellite Networks (GILT)
  • ORBCOMM (ORBC)
  • EchoStar (SATS)
  • Trimble (TRMB)
  • Iridium Communications (IRDM)
  • Maxar Technologies (MAXR)
  • Eutelsat Communications (ETCMY)
  • Garmin (GRMN)

Next is the SPDR Kensho Final Frontiers ETF (ROKT), which tracks the S&P Kensho Final Frontiers Index. Launched in October 2018, the fund provides an effective way to pursue long-term growth potential by investing in a portfolio of companies involved in the expansion of human understanding and presence in outer space, as well as in the oceans. The S&P Kensho Final Frontiers Index is heavily weighted towards the aerospace and defense sector, accounting for about 65% of the fund's holdings. The fund provides a different approach to investing in the satellite and space sector with companies in research and consulting, industrial conglomerates, industrial machinery, industrial manufacturing services and semiconductors. The top holdings of the fund are:

  • Maxar Technologies (MAXR)
  • Hexcel (HXL)
  • Boeing (BA)
  • Aerojet Rocketdyne (AJRD)
  • Raytheon Technologies (RTX)
  • Virgin Galactic (SPCE)
  • Northrop Grumman (NOC)
  • L3Harris Technologies (LHX)
  • HEICO (HEI)
  • CACI International (CACI)

ARK Investment Management will be launching its ETF soon. ARK has already filed for approval of the ARK Space Exploration ETF (ARKX); according to that filing, ARK Space Exploration ETF will be an actively-managed ETF that will invest (at least 80% assets) in domestic and foreign companies that are engaged in the fund’s investment theme of space exploration and innovation. The term “Space Exploration” is defined as “leading, enabling, or benefitting from technologically enabled products and services that occur beyond the surface of the Earth.”

Disclaimer: The report has been carefully prepared, and any exclusions or errors in it are totally unintentional. The author has no position in any stocks mentioned.

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

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Prableen Bajpai

Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.

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