[ad_1] Investing in emerging industries like space tourism often presents a tempting opportunity for those chasing growth. The potential upside can be significant, but the risks are equally high, so the road to success can be tumultuous and prone to disappointment. An illustrative example is Virgin Galactic Holdings Inc. (ticker: SPCE), spearheaded by Richard Branson. This company, which ventured into the relatively uncharted territory of space tourism, saw its shares soar to $55 in 2021 after its 2019 initial public offering. However, the trajectory wasn’t maintained, and the shares have since plummeted to $1.49 as of Nov. 1. This dramatic shift underscores the unpredictable nature of betting on single companies in emerging industries that are still in their infancy. As with any innovative trend, late investors in Virgin Galactic suffered from the risk of the anticipated growth already taking place, or being priced in. “The mistake that many people make with thematic investing is that the price of the stocks may already reflect market expectations,” says Jeremy Bohne, founder and financial advisor at Paceline Wealth Management. While the performance of Virgin Galactic might have been underwhelming, it’s worth noting that the space industry is diverse. Companies involved in other areas, such as satellite deployment, space station manufacturing, and even research and exploration, have experienced varying levels of success. Some have found stable ground and are growing steadily, but pinpointing these success stories ahead of time is no easy task. The industry’s inherent complexities and the rapid pace of technological advancements make stock-picking particularly challenging. For investors keen on tapping into the potential of the space industry but wary of the pitfalls of backing a single company, thematic exchange-traded funds, or ETFs, offer a viable alternative. Thematic ETFs can provide investors with a more diversified basket of stocks in a particular industry or trend. In the context of the space industry, a thematic ETF would include a mix of stocks from various companies operating in different verticals of the sector. Instead of the investor’s fortune being tied to the success or failure of a single company, it’s spread across several. The diversified nature of ETFs means that even if one or two companies within the fund face setbacks, the performance of others can potentially offset those losses. However, these ETFs still come with unique risks to be aware of. “Thematic ETFs offer easy diversification, convenience and professional management, but often this comes with much higher expense ratios than basic index ETFs, as well as industry-specific risks,” says Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors. “The long-term trend of a theme may be in place, but it may be early in the cycle and subject to the ups and downs of fads, so consider limiting exposure to themes that can face flashy headline sensationalism.” Here are seven space-industry stocks and ETFs investors can buy in 2023: Stock or ETF Year-to-date performance as of Nov. 1 Rocket Lab USA Inc. (RKLB) 12.5% Intuitive Machines Inc. (LUNR) -70.1% iShares U.S. Aerospace & Defense ETF (ITA) -0.49% Invesco Aerospace & Defense ETF (PPA) 4.9% SPDR S&P Aerospace & Defense ETF (XAR) 5.9% ARK Space Exploration & Innovation ETF (ARKX) 3.3% Procure Space ETF (UFO) -18.8% Rocket Lab USA Inc. (RKLB) Investing in the space sector doesn’t simply mean backing companies that take affluent tourists just beyond Earth’s atmosphere. For instance, telecommunications companies depend on satellites to relay signals across vast distances, enabling global communication. Beyond calls and messages, satellite technology supports navigation systems, weather forecasting and even international broadcasting. RKLB is one of the few companies offering these services, providing propulsion, spacecraft, satellite platforms and launch vehicles. The company is currently contracted with NASA for its Escape and Plasma Acceleration and Dynamics Explorers mission, which will orbit Mars to collect scientific data. RKLB is providing two spacecraft for the mission’s scheduled 2024 launch. Intuitive Machines Inc. (LUNR) Since the last Apollo mission in 1972, the Moon had remained untouched by human astronauts. But that’s set to change, as NASA’s focus has once again shifted moon-ward with the Artemis II mission. This 10-day mission will be crewed by four astronauts, with the objective of testing new equipment and laying the foundation for a possible long-term lunar presence. While NASA itself isn’t available for public investment, those interested in the renewed lunar exploration can consider LUNR. This company currently manufactures rocket-fueled drones and rovers for lunar exploration, orbital delivery services and data network infrastructure. However, LUNR only has a market capitalization of $63 million, making it a fairly risky micro-cap stock with high volatility. iShares U.S. Aerospace & Defense ETF (ITA) “When selecting a space-themed ETF, try to examine the underlying holdings,” Schulman says. “Does the ETF contain the kind of company exposure you desire with riskier, up-and-coming shoot-for-the-stars names, or more stable aerospace and defense firms that have space exploration and satellite divisions?” For balance, consider pairing risky small-caps like RKLB and LUNR with an established ETF like ITA. This ETF doesn’t have a pure-play space focus. Instead, it holds traditional, large-cap aerospace manufacturers like Boeing Co. (BA), Lockheed Martin Corp. (LMT) and Howmet Aerospace Inc. (HWM) to name a few, with Boeing sitting at around 16.8% of the ETF. Defense contractor RTX Corp. (RTX) also has a sizable presence at 18.7%. The ETF charges a 0.4% expense ratio. Invesco Aerospace & Defense ETF (PPA) ITA’s benchmark, the Dow Jones U.S. Select Aerospace & Defense Index, has a very top-heavy focus. Its top two holdings, Boeing and RTX, collectively account for around 34% of its overall weight. For a more balanced aerospace and defense ETF, consider PPA, which tracks the SPADE Defense Index with a total of 54 holdings, compared to the 33 held in ITA. Despite its aerospace and defense focus, PPA still has some palpable exposure to companies with space operations with notable holdings including Boeing, Lockheed Martin, L3Harris Technologies Inc. (LHX), Heico Corp. (HEI), Kratos Defense & Security Solutions Inc. (KTOS), and Viasat Inc. (VSAT). However, the ETF is more expensive than ITA, with a 0.58% expense ratio. SPDR S&P Aerospace & Defense ETF (XAR) Many companies with greater space exposure tend to be small-cap stocks due to the up-and-coming nature of the industry. In market-cap-weighted aerospace and defense index ETFs like ITA and XAR, these companies can get drowned out by their large- and mid-cap counterparts, which receive proportionately more exposure as a result. For an alternative, consider XAR. This ETF tracks the S&P Aerospace & Defense Select Industry Index, which assigns equal weights to large-, mid- and small-cap stocks. Therefore, a small-cap pure-play space stock like Virgin Galactic with a market cap of roughly $613 million would be assigned the same exposure as Boeing, with $116 billion in market cap, when the ETF rebalances periodically. XAR charges a 0.35% expense ratio. ARK Space Exploration & Innovation ETF (ARKX) “There’s a big misconception that thematic ETFs have a longtime place in investors’ portfolios,” Bohne says. “In my opinion, the more narrowly focused they are, the shorter the likely holding period will be, and thus the more closely they’ll need to be managed.” Bohne says that thematic ETFs may be more suitable as a tactical trading tool rather than a long-term buy-and-hold investment. A good example is ARKX, which is one of the innovation-themed ETFs from Cathie Wood’s Ark Invest. Unlike the previous ETFs, ARKX is actively managed, with Ark Invest’s team picking stocks they believe will outperform based on their proprietary research. As an active ETF, ARK is able to buy and sell holdings as it sees fit based on changing outlooks or fundamentals. The ETF charges a 0.75% expense ratio. Another ETF with pure-play exposure to space stocks that’s worth a look is UFO. This aptly named ETF tracks the S-Network Space Index. Investors should take note of how the index defines a company as space-related; industries encompassing rocket and satellite production and operation, ground equipment for satellite systems, space tech and hardware, space imagery, and telecommunications currently qualify. However, the ETF’s index also holds some companies that are earthbound but are crucially dependent on space industries to operate. For example, the index would count a company selling GPS smartwatches as a space-related company. Like ARKX, this ETF is fairly pricey, with a 0.75% expense ratio, and it has only attracted around $34 million in assets. [ad_2] Source link Post navigation District of New Jersey | Former Top Executive of Investment Fund Admits $294 Million Securities Fraud Conspiracy How Much Money Should You Have in the Stock Market if You’re 25?