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Guide to Space Industry ETF Investing

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Space industry refers to economic activities related to manufacturing components that go into Earth's orbit or beyond. Per Ark Investments, there are four kind of companies that are involved into the space industry.

Orbital Aerospace Companies are companies that launch, make, service, or operate platforms in orbital space, including satellites and launch vehicles. Suborbital Aerospace Companies are companies that launch, make, service, or operate platforms in the suborbital space, but do not reach a velocity needed to remain in orbit around a planet.

Enabling Technologies Companies are companies that develop technologies used by Space Exploration related companies for successful value-add aerospace operations. These operations include artificial intelligence, robotics, 3D printing, materials, and energy storage. Aerospace Beneficiary Companies are companies whose operations stand to benefit from aerospace activities, including agriculture, internet access, global positioning systems (GPS), construction, imaging, drones, air taxis, and electric aviation vehicles.

Procure ETFs highlight the crucial need for investing in the space economy. First, location-based service apps like ridesharing or food delivery are powered by satellite-enabled navigation. Second, decreasing launch costs are creating economically sensitive opportunities in the arena of satellite, tourism and telecom. Third, the new formation of U.S. Space Force will likely government spending on space investment.

Growth Projections of Space Economy

According to Morgan Stanley, the global space industry could generate revenue of $1.1 trillion or more in 2040, up from ~$350 billion in 2018. Bank of America estimates the space economy to grow to $1.4 trillion by 2030.

Morgan Stanley estimates that satellite broadband will make up 50% of the projected growth of the global space economy by 2040—and as much as 70% in the most bullish scenario. Launching satellites that offer broadband Internet service will help to drive down the cost of data, just as demand for that data skyrocketed.

Beneficiary Industries

Near term, space as an investment theme is also likely to impact a number of industries including Aerospace & Defense, IT Hardware and Telecom sectors. The most important industry to be impacted is satellite broadband Internet access, per Morgan Stanley.

European nations agreed recently to boost their spending on space by 17% over coming years as competition intensifies with the United States and China. Since the space economy has continued to grow, investors must be interested in knowing the ETF investing opportunities associated with this area. Below we highlight a few.

ETFs in Focus

ARK Space Exploration & Innovation ETF (ARKX - Free Report)

Companies within ARKX are focused on innovation across “space”. The advisor defines “Space Exploration” as leading, enabling, or benefitting from technologically enabled products and/or services that occur beyond the surface of the Earth. The fund charges 75 bps in fees.

Aerospace Beneficiaries (43%) take the top spot in the fund, followed by Enabling Technology (28.3%). Industrials (54.2%) is top sector, followed by Information Technology (25.3%). Trimble Inc (101%) takes the top spot in the fund, as far as company weights are concerned. Iridium Communications Inc (7.45%) and Aerovironment Inc (7.31%) take the next two spots in the fund.

Procure Space ETF (UFO - Free Report)

The underlying S-Network Space Index measures the performance of companies engaged in space-related industries. Iridium Communications Inc (5.65%), Global Star Inc (5.50%) and SES SA (5.23%) are top three stock holdings of the fund. The 46-stock fund charges 75 bps in fees.

Media & Communications (46.89%) and Industrials (38.63%) hold the top two spots in the sector breakdown. As far as geographic breakdown is concerned, United States takes the top spot at 77.71%, followed by France (5.08%).

SPDR Kensho Final Frontiers ETF (ROKT - Free Report)

The SPDR S&P Kensho Final Frontiers ETF looks to track an index utilizing artificial intelligence and a quantitative weighting methodology to capture companies whose products and services are driving innovation behind the exploration of the final frontiers, which includes the areas of outer space and the deep sea. The 35-stock fund charges 45 bps in fees.

Iridium Communications (4.90%), Boeing Company (4.37%) and Aerojet Rocketdyne Holdings Inc. (4.20%) hold top three positions in the fund. Aerospace & Defence (54.34%) is the top sector of the fund, followed by Research & Consulting Services (9.85%) and Industrial Machinery (6.65%).

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