Down-to-Earth Investing in the Space Economy

My grandfather worked on the Gemini spacecraft, which launched humans into space in the 1960s, and I’ve been fascinated with space for as long as I can remember. A few months ago, hoping to engender the same enthusiasm in my kids, I took them to see the Apollo 11 lunar landing vehicle at the Smithsonian Air and Space Museum. After staring at the vehicle for a minute, my son looked up and asked, “They landed on the moon in that? It looks like it was made of pipes and tinfoil.”

Indeed, what was once the crowning glory of human technology looks downright primitive today. And yet, despite huge advances in technology in the 50 years since the Apollo 11 mission, the notion of landing on the moon and exploring space can still seem abstract and futuristic. However, as the space industry grows, tangible space-related investing opportunities are starting to emerge.

To understand them, we need to bring space back down to earth, so to speak. One way is to think about space as part of the larger transportation industry, which can offer much-needed context for investors. Within the transportation framework we’ve developed, we find four main subsectors can help bring space into focus: parts suppliers, goods transportation, passenger transportation and supporting infrastructure.    

Let’s start at the bottom of the supply chain with parts suppliers. Opportunities in this sector include traditional aerospace parts, sensors, satellite manufacturing and material science. Some of these opportunities are quite similar to technologies involved in autonomous cars or shipping.

Space travel historically has required massive amounts of data—from fuel tank pressure to structural integrity and even biometric data on astronauts. Sensors, which provide data relevant to safe and reliable space travel, are one area to consider. More traditional aerospace parts, like engines and rockets, are supplied by major aerospace and defense companies. They have unclassified space programs ongoing.

Satellite manufacturing also proves critical, as data move beyond the clouds and into space. Some of the latest technology around nanosatellites has lowered the cost significantly. Finally, material science will play an important part in the space industry, as firms test the limits of different carbon fibres, such as graphene, and metals, such as high-grade aluminum.    

Space as a logistics play makes up the largest commercial opportunity today, with companies and governments paying to launch satellites into orbit. A more nascent conjecture concerns mineral extraction and transit, in other words, mining asteroids.

While these areas get the most attention, transport of everyday items over long distances on Earth via the final frontier may not be far off. One rocket technology holds the prospect of carrying up to 150 tonnes at a speed of almost 30,000 kilometres per hour. While not economic over short distances, that kind of “domestic” space transportation could be many times faster than air freight and even cheaper than rail over long distances.    

Great potential exists for innovation and improved efficiency to transport people on terra firma, but the idea of carrying passengers into space has captured the imaginations and ambitions of several companies. That may make space tourism the first and most viable stage of what could become a longer odyssey to building outposts on the moon, or even Mars, perhaps sometime within the next 50 years. Eventually, intercontinental travel could also change drastically with space flight. At a speed of 30,000 kilometres per hour, passengers could theoretically reach any destination on earth in 30 minutes or less. Space ferries may lie ahead.    

Infrastructure to support space transportation will grow as some of the commercial opportunities become viable. 

One of the most important services could be trash collection. The declining costs of building and deploying satellites mean more objects in orbit. That also means a higher likelihood of collisions and a rise in space debris orbiting the earth. Removing that debris will be critical to keeping space safe; some startups are already working on this. Similarly, travelling longer distances may mean building restocking and refueling stations in space.

Space development could also integrate with earthbound infrastructure. For example, space could be part of a wireless data infrastructure that supports the tremendous bandwidth needed for autonomous ships sailing through remote waters globally. We believe oceanic goods shipment will be an area of early autonomous adoption, but faster connections are needed to make that a reality. 

Many pure-play space companies are private, but investors can consider some public market sectors. Major aerospace and defence companies play a role in the space industry as suppliers, transporters, intellectual property owners and infrastructure developers. Engineering software and advanced materials firms offer an interesting play, as the industry looks to design more durable, reusable and lightweight rocket technologies. Opportunities may also emerge around space-freight logistics, as well as construction firms that can build new facilities.

These opportunities may seem far away, but think of the changes that the past 50 years have brought. The Apollo moon landing was a tremendous accomplishment, given the technology available at the time. With all the advances since then, imagine what the companies working on space solutions may soon be able to achieve.