Unless you’ve managed to avoid the recent news flow, you’ll know that our final frontier is about to get more crowded. Today, I’m looking at how private UK investors like myself can get a slice of the action with space stocks.
Just how hot is space?
Space is very hot. Over recent weeks, some of the most successful businessmen in the world, Amazon‘s former CEO Jeff Bezos, Tesla‘s Elon Musk and the UK’s own Richard Branson have been involved in a battle to reach the stars first.
As things stand, Branson looks likely to win. He’s set to ride in Virgin Galactic‘s ‘space plane’ VSS Unity on 11 July. Just over a week later, fellow billionaire Bezos will take off inside his Blue Origin spacecraft, named New Shepard.
Musk isn’t planning on visiting space himself just yet. That said, he’s announced that SpaceX will launch an all-civilian private mission in orbit by the end of 2021.
But let’s return to earth for a second. Even if the endeavours of Bezos, Branson and Musk are collectively successful, it’ll be a long time before the average worker can start planning for a trip in space. A ticket to ride with Bezos recently sold for a cool $28m.
This isn’t to say I can’t get involved in another way.
Investing in space stocks
Naturally, the options available to grounded UK investors are fairly limited at present. However, there are signs this is changing.
One example, with its fairly memorable ticker, is Procure Space UCITS ETF (LSE: YODA). This US-focused passive fund came to the UK market at the start of June.
Marketed as offering “pureplay exposure to the space economy,” YODA tracks 30 stocks that make a significant amount of revenue from satellite technologies, rocket manufacturing and telecommunications. The ongoing fee of 0.75% is expensive for a fund run by a computer rather than a human. Then again, this isn’t your average FTSE 100 tracker.
Speaking of which, an alternative to YODA is FTSE 100 member Scottish Mortgage Investment Trust (LSE: SMT). Thanks to being allowed to invest in unquoted companies, SMT has a holding in SpaceX. While there’s no guarantee that performance will be replicated here, this does bode well considering Baillie Gifford’s stonking success to date with Tesla.
Of course, there’s nothing to stop UK investors from investing directly in Virgin Galactic either. Blue Origin, however, is not publicly traded.
How risky is all this?
Like space travel itself, investing in this exciting part of the market is far from risk-free. There’s no guarantee it’ll be as lucrative a theme as, say, cybersecurity, video gaming or electric cars.
While the appearance of YODA suggests that space stocks are set to become more mainstream, we don’t know which of its constituents will thrive and which won’t. For a while, the latter may outnumber the former. We also don’t know how popular this particular fund will be with UK investors and how patient early holders will be. Will the share price get volatile if/when the hype dies down?
Of course, SMT’s performance speaks for itself. While undoubtedly tech-focused, the diversification that comes from not being a pure space play may also be more attractive.
This is why, for now, I’ll stick to drip-feeding my cash into the FTSE 100 constituent.