Cathie Wood going to space…with the launch of a new space exploration ETF from Ark Invest, CNBC reports.
The Ticker: ARKX
Why It Matters: In an interview with CNBC, Ark Invest analyst Sam Korus broke down the firm interest in space, saying it’s “already an invisible backbone to our economy and we think that’s only going to become more so as [satellite] constellations launch.”
The ETF holds 39 stocks including Iridium, Virgin Galactic, Kratos, L3Harris, Lockheed Martin and Boeing, all pure-play space companies or defense and aerospace firms.
- It also includes a few names with fewer ties to space, such as JD.com, Alibaba, Trimble and Deere.
Numbers To Consider:
- On its first day of trading, ARKX fell around 1%.
- It closed at $20.30.
The Crystal Ball: Could we see some of SPAC interest gravitate toward space-based companies?
- Korus: “I think with SPACs it’s important to remember that a lot of these are almost at the pre-IPO stage. We really want to be sure that we’re picking the winners long term, particularly in aerospace – where many companies do go bust and things get delayed.”
This is a true sign that ARK Invest is selling products to the market, and not the best risk-adjusted portfolios. And in that sense, I applaud Cathie Wood and her team for assembling interesting portfolios for those that want to invest behind “moonshot” themes.
Do I believe that space exploration will pick up steam over the next 5 years and provide amazing returns? Probably not.
Yes, there are companies like SpaceX that will do well, but what’s going to drive this?
- Starlink is an “upgrade” of a surprisingly mature satellite communications industry. Viasat and Intelsat have been around for a while, and SpaceX is doing it cheaper and faster.
- Government space contracts are ultimately funded by the taxpayer. I have not seen any huge reasons to believe that the government will double, triple, or 10x their spending on space missions.
- Elon’s “mission to mars” is being funded by government contracts
Ultimately I haven’t yet seen a reason to believe we’re on the cusp of breakthrough activity on the space exploration front, at least in the next five years. Autonomous driving is a much more tangible “moonshot” theme, in my opinion.
Lastly, looking through ARKX’s holdings is somewhat comical and makes me question why I’d carve out a spot in my portfolio for this thing. Here are some of their holdings….
- The 3D Printing ETF (6.08%), which is another ARK ETF
- JD.com (4.92%), Amazon.com (2.99%), Alphabet (2.80%), Alibaba (1.56%), Netflix (1.27%), and Tencent (0.97%)
- Lockheed Martin (4.40%), Boeing (3.58%), Dassault (2.51%), Airbus (1.58%)
- Nvidia (3.36%), Teradyne (2.73%), Honeywell (1.09%), TSMC (1.01%), Xilinx (0.98%)
I understand that the thesis is to buy things that will benefit from space exploration, but in reality, it just seems like a mash-up of well-known FAANG, Aerospace & Defense (A&D), and Semiconductor companies.