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Stocks  | January 20, 2021

What lies beyond the Earth’s atmosphere is breathtakingly beautiful. A common definition of space is the Karman Line, the imaginary boundary 100 kilometers (62 miles) above the sea level. On October 4, 1957, the Union of Soviet Socialist Republics launched Sputnik, the first artificial satellite to orbit the Earth. On April 12, 1961 history was made when Russian cosmonaut, Yuri Gagarin became the first human in space. And since then, human’s interest in space skyrocketed.

According to BizVibe, The global space industry is currently worth $414.8 billion. In 2019, space companies raised a record of $5.8 billion in private investments. Totaling investments to $26 billion since 2009. Evidently, the amount of money invested in space companies each year is increasing significantly. In the USA alone, the space industry was valued at approximately $158 billion and could grow into a trillion-dollar industry by 2040.

The space industry has appeared to be a viable sector with serious growth potential in the coming years. However, the industry was not immune to the economic downturn caused by COVID-19. OneWeb, one of the leading satellite internet broadband service providers filed for bankruptcy in the midst of the pandemic, and space missions had either been suspended or delayed.

Despite the negative effects of the pandemic, the space industry was able to bounce back with the news that new constellations of satellites are due to enter low-Earth orbit in the coming years, news of satellite-based internet, space travel, and news on point-to-point transport around the earth.

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Investors' interest in space exploration was further sparked when CEO Elon Musk, the world’s richest man and founder of Tesla (TSLA) and SpaceX successfully completed its first manned mission on May 30, 2020. This event made the company the first private company to launch astronauts for NASA. SpaceX is a privately held company.

The Biden Administration could further spark this interest as Biden is committed to support NASA’s work to return Americans to the moon and go beyond Mars. Andrew Chanin, co-founder, and CEO of ProcureAM said that space should be a priority for any administration.

“We’re actually really encouraged, although the previous administration has really done a lot to push the space industry forward, both from a commercial and military and defense standpoint. So, we believe that space is something that’s here to stay and should and will be potentially a priority for any administration in the future.”

We believe we will start with colonizing the moon first and after we perfect our technology and skills our next stop is going to be Mars. Here is what NASA said about this:

NASA’s human lunar exploration plans under the Artemis program call for sending the first woman and next man to the surface of the Moon by 2024 and establishing sustainable exploration by the end of the decade. The agency will use what we learn on the Moon to prepare for humanity's next giant leap – sending astronauts to Mars.

Working with U.S. companies and international partners, NASA will push the boundaries of human exploration forward to the Moon and on to Mars. NASA is working to send the first woman and next man to the Moon by 2024 as part of the Artemis program and establish a permanent human presence there within the next decade to uncover new scientific discoveries and lay the foundation for private companies to build a lunar economy.

In order to identify the 16 best space stocks to buy now, we started with the top holdings from ROKT ETF and UFO ETF and we were able to narrow down our list to 16 stocks by using our hedge fund sentiment scores.

Our in-house analysis shows that we can use the sentiment information gathered from the hedge fund filings to classify in advance a select group of stocks that can beat the S&P 500 index by double digits annually on average. For instance, the portfolio of our monthly newsletter’s stock picks has beaten the market by over 88 percentage points since March 2017. Some of the portfolio holdings of our monthly newsletter have been shared publicly too. In October, we shared this real estate stock and since then, it’s been up nearly 50 percent.

Based on our hedge fund sentiment data, we now present to you the 16 best space stocks to buy now based on the stock picks of 800+ hedge funds tracked by Insider Monkey:

16. Virgin Galactic (NYSE:SPCE)

No of HFs: 24

Total Value of HF Holdings: $76 Million

We start our list of best space stocks to buy now with SPCE. The company is known for developing commercial spacecraft that provide spaceflights to space tourists and launches space science missions. An insider purchased 350 shares at around $16 in May 2020. The stock nearly doubled since then. In a recent article we summarized why SPCE shares have been skyrocketing:

SPCE shares have been on a roller coaster ride since going public. Virgin Galactic stock was trading around $12 at the start of 2020. The stock touched a high of $42.49 in February following the news that nearly 8,000 people are interested in flying to space with the company, with 600 of them already purchased the tickets for the first flight.

Virgin Galactic in July revealed the interior cabin design and seating arrangement of its VSS Unity spacecraft to offer media and interested people a glimpse of experience passengers will have during the actual flight. SPCE stock once again rose in December in anticipation of a test flight of VSS Unity. However, the company had to abort the test flight in the mid-air due to technical issues. The stock fell more than 17 percent after the failed attempt.

The company’s share price once again rose above $30 on Thursday following the news that ARK Investment Management is planning to launch a space-themed ETF. Industry experts believe that the said ETF will certainly add Virgin Galactic to its portfolio. Ark already owns 7 ETFs focusing different industries such as 3D printing, robotics, and genomics.

15. Aerojet Rocketdyne (NYSE:AJRD)

No of HFs: 26

Total Value of HF Holdings: $462 Million

The American rocket and missile manufacturer, AJRD was formed in 2013. The company recently announced the completion of its assembly for the first AR1, a new rocket engine funded by the US Air Force. However, the company does not expect to test-fire until late 2022. The company highlighted that AR1 is ideally suited to meet the market needs.

"The AR1 engine is ideally suited to meet the market needs for a medium-class launch vehicle and a responsive launch capability.”

The top hedge fund holder of this stock is Ken Griffin’s Citadel Investment Group which had $213 million invested in the stock at the end of September.

14. EchoStar Corporation (NASDAQ:SATS)

No of HFs: 28

Total Value of HF Holdings: $346 Million

The satellite communication solutions provider SATS stocks is trading at $24 as of 5:39 PM on January 14, 2020. They were mentioned as one of the 10 Best Communication Equipment/5G Stocks to Buy Now. During the third quarter of 2020, the company announced a consolidated revenue of $474 million.

The top hedge fund holder of this stock is Jim Simons’ Renaissance Technologies, which had over $94 million invested in the stock at the end of September.

Steel City Capital mentioned a few of their comments about the stock in an article:

“EchoStar (Long): While the Partnership’s investment in EchoStar (SATS) is not new, it has not previously been discussed in any detail. The company’s business is very simple – it derives the vast majority of its revenue from the sale of satellite-based broadband internet services to consumers and enterprises across the Americas. As of 6/30/2020, SATS had 1.5 million subscribers, of which 1.2 million are located in the U.S. To a lesser extent, the company generates revenue from the sale of equipment to government and commercial customers.

The average consumer is unlikely to be familiar with SATS offering. While more than 100 million U.S. households have broadband internet access, EchoStar and its main competitor, ViaSat, only serve a combined 1.8 million subscribers. Most American households rely on terrestrial service from cable or fiber. The small minority of households that rely on satellite connectivity do so because it is too costly to run a terrestrial line to their location. These households tend to be located in geographies with very limited population density. Specifically, more than half of SATS consumer subscribers are located in areas with five or fewer houses per square kilometer. In areas like this, it just doesn’t make sense for the local cable company to run a line to the house – they’ll never earn an adequate return on their investment.

SATS is currently valued at ~3.5x EV/EBITDA (MRQ annualized) and has reasonable growth prospects ahead of it. Specifically, the company will launch its Jupiter 3 satellite in the second half of 2021, resulting in a combination of additional subscribers and the availability of higher speed and capacity for existing customers. The new satellite should begin contributing to profitability sometime in 2022. In addition to its core satellite business, the company owns a grab bag of other assets whose value could be monetized in the future. The most interesting are the S-Band spectrum licenses being used to develop new commercial service offerings (i.e. Internet of Things).

At 3.5x EV/EBITDA, SATS valuation is an outlier in the satellite communication industry. Its closest North American peer – ViaSat – currently trades at 8.0x EV/EBITDA, consistent with its historical premium. The reasons for this premium confound me – SATS is the clear leader in North America (1.2 million subs vs. 600,000 subs) and has far less exposure to the in-flight connectivity business which has been battered by the pandemic. As another point of reference, a consortium of private equity investors acquired European-based Inmarsat in 2019 at an implied EV/EBITDA multiple of ~9.0x.”

13. ViaSat, Inc. (NASDAQ:VSAT)

No of HFs: 30

Total Value of HF Holdings: $907 Million

The stockwas mentioned as one of the 5 Best Value Stocks to Buy Now According to Seth Klarman. They provide high-speed satellite broadband services and secure networking systems covering military and commercial markets. The company recently announced its partnership with SKY Brasil to expand the distribution of VSAT’s satellite internet service to more homes across Brazil. Sérgio Ribeiro, chief operations officer at SKY Brasil said,

"SKY is present in all cities within Brazil, offering services that adapt to the daily life and different consumer needs and profiles of Brazilians. We are specialists in offering excellent service and technical support with an unbeatable distribution network that delivers great value and a highly-differentiated service that can be seen in our business results on a national scale. We look forward to working with Viasat. This partnership is in line with SKY's objective, which is ensuring all Brazilians have access to information and entertainment,"

The top hedge fund holder of this stock is Seth Klarman’s Baupost Group, which had over $560 million invested in the stock at the end of September. An insider purchased 2,556,891 shares at around $39. The stock is down 5% since then.

12. Teledyne Technologies, Inc. (NYSE:TDY)

No of HFs: 31

Total Value of HF Holdings: $343 illion

TDY was mentioned in Monday’s Top 10 Gainers in Focus. They are known for their aerospace and defense electronics. The company recently announced that they will be acquiring FLIR Systems in a cash and stock transaction valued at approximately $8.0 billion. Robert Mehrabian, Executive Chairman of Teledyne said,

“At the core of both our companies is proprietary sensor technologies. Our business models are also similar: we each provide sensors, cameras and sensor systems to our customers. However, our technologies and products are uniquely complementary with minimal overlap, having imaging sensors based on different semiconductor technologies for different wavelengths. For two decades, Teledyne has demonstrated its ability to compound earnings and cash flow consistently and predictably. Together with FLIR and an optimized capital structure, I am confident we shall continue delivering superior returns to our stockholders.”

The top hedge fund holder of this stock is Ken Fisher’s Fisher Asset Management, which had over $66 million invested in the stock at the end of September.

11. CACI International (NYSE:CACI)

No of HFs: 31

Total Value of HF Holdings: $575 Million

The Consolidated Analysis Center Incorporated is a multinational company that offers information technology products and services. They specialize in system integration, information assurance, and alike. During the third quarter of 2020, the company reported a revenue of $1.5 billion.

The top hedge fund holder of this stock is Ken Griffin’s Citadel Investment Group, which had over $104 million invested in the stock at the end of September. An insider recently purchased 132 shares at around $189. The stock is up more than 28% since then.

10. Garmin LTD (NASDAQ:GRMN)

No of HFs: 32

Total Value of HF Holdings: $515 Million

GRMN ranks 10th in our list of the best space stocks to buy now. The navigation and communications provider enabled by GPS technology was founded in 1989. The company was awarded the Supplier of the Year award from Embraer. This marked their 11th time to receive the award. Recently, the company announced the acquisition of all the asses of GEOS worldwide limited subsidiaries. Brad Trenkle, vice president of Garmin’s outdoor segment said the acquisition will enable them to provide more peace of mind to their users.

“With this acquisition, Garmin is now able to provide even more peace of mind to our inReach users. In an emergency, every moment matters. The addition of the IERCC to the Garmin family reinforces our commitment to helping our active lifestyle customers make it home safe from their adventures.”

The top hedge fund holder of this stock is Cliff Asness’ AQR Capital Management, which had over $158 million invested in the stock at the end of September. An insider recently purchased 400 shares at around $74. The stock up more than 62% since then.

9. Trimble, Inc. (NASDAQ:TRMB)

No of HFs: 35

Total Value of HF Holdings: $1.030 Billion

The ninth-best space stock to buy now is TRMB. The stock was also mentioned in the Top 10 Robotics and Artificial Intelligence Stocks to Buy Now. The company is a California-based hardware, software and services technology company. That delivers products that aim to connect the physical and digital worlds. During the third quarter of 2020, the company reported a $792.8 Million revenue.

8. Sirius XM Holdings, Inc. (NASDAQ:SIRI)

No of HFs: 37

Total Value of HF Holdings: $748 Million

SIRI was mentioned as one of the 10 Best Dividend Stocks Under $20. The company is knowns as one of the top broadcasting companies. SIRI operates from its satellites. Recently, the company announced that they have extended their agreement with the National Basketball Association in which users will gain access to live audio broadcasts for every NBA game.

7. Honeywell (NYSE:HON)

No of HFs: 41

Total Value of HF Holdings: $970 Million

The seventh-best space stock to buy now is HON. The stock was also mentioned in the 10 Best Defense Stocks to Buy For 2021. In an article, Madison Investments mentioned that the stock is a relative yield example within Industrials:

“This quarter we are highlighting Honeywell (HON) as a relative yield example within Industrials. HON is a leading industrial conglomerate with an increasing focus on software and automation. We believe its global scale, history of innovation and strong culture focused on continuous operational efficiency create a sustainable competitive advantage. HON operates four segments including Aerospace, Building Technologies, Performance Materials and Technologies, and Safety and Productivity Solutions. These businesses serve diverse end markets including aerospace, U.S. defense contractors, e-commerce and oil and gas customers.

Our thesis on HON is that it will successfully leverage its software technology across its huge installed base of customers and products. Its installed base includes approximately 36,000 auxiliary power units, 25,000 engines, 20,000 wheels and brakes, 20,000 flight management systems and 10,000 units of communication hardware. Importantly, HON software technology is integrated into mission-critical operations of its customers including cockpit control in aircraft flights, warehouse automation in manufacturing and connected solutions in commercial buildings. We believe its technology advantage is due to above-average spending on research and development (R&D). For example, in key aerospace businesses, HON spends 4.5% of sales on R&D compared to 2-3% spending by most competitors.

The fund purchased HON in the quarter after it reached a reasonable valuation with an attractive dividend yield and relative dividend yield versus the S&P 500. At the purchase price in the upper $160s, the stock traded for less than 20x estimated earnings expected over the forward 12 months. We believe this valuation can grow over time if HON continues to innovate and create new products, while its underlying end markets like aerospace recover over time. It also has an A rated balance sheet (as rated by S&P), an absolute dividend yield of 2.2%, and an attractive relative yield of 1.3x versus the S&P 500, which is the highest relative yield since 2012, as shown below. The company also has a history of dividend increases as it has grown dividends per share by 12.5% per year on average over the last five years.

Risks to the thesis include a prolonged economic downturn that results in sustainable declines in its key end markets like aerospace. We estimate about 40-45% of sales are exposed to these end markets. Other risks include lost market share if customers don’t like its evolving software offerings, and the risk the company makes a value-destroying acquisition. We think this last risk is relatively low as HON has a history of successful acquisitions.”

6. Northrop Grumman (NYSE:NOC)

No of HFs: 42

Total Value of HF Holdings: $843 Million

NOC was mentioned in an article of the 10 Most Powerful Militaries in the World in 2020. During the third quarter of 2020, the global aerospace and defense technology company announced a sales increase of 7 percent to $9.1 billion from $8.5 billion in the third quarter of 2019.

The top hedge fund holder of this stock is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, which had over $195 million invested in the stock at the end of September.

5. L3Harris (NYSE:LHX)

No of HFs: 42

Total Value of HF Holdings: $1.14 Billion

The fifth best space stock to buy is L3Harris. The company operated in every domain- air, land, sea, space, and cyber. They are responsible for delivering end-to-end solutions that meet customers’ mission-critical needs. Recently, the Missile Defense Agency awarded LHX a $121 million contract to build a prototype satellite that will track hypersonic weapons.

The top hedge fund holder of this stock is Ric Dillion’s Diamond Hill Capital, which had over $174 million invested in the stock at the end of September. An insider recently purchased 161 shares at around $191. The stock is down 0.5% since then.

4. Heico Corporation (NYSE:HEI)

No of HFs: 43

Total Value of HF Holdings: $712 Million

HEI designs and produces jet engine and aircraft component replacement parts. The stock was mentioned as one of the 15 Best Undervalued Stocks to Buy Now. The top hedge fund holder of this stock is Robert Joseph Caruso’s Select Equity Group, which had over $88 million invested in the stock at the end of September. An insider recently purchased 978 shares at around $111. The stock is up more than 24% since then.

3. Lockheed Martin (NYSE:LMT)

No of HFs: 47

Total Value of HF Holdings: $1.66 Billion

Lockheed Martin was mentioned as of the Top 10 Sin Stocks to Buy Now. The top hedge fund holder of this stock is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital, which had over $479 million, invested in the stock at the end of September. An insider recently purchased 1,354 shares at around $376. The stock is down 7% since then.

Inan article, RiverPark Advisors, LLC mentioned that under Jim’s leadership the stock grew its market capitalization from $2 billion to $100 billion.

“Lockheed Martin is the world’s largest aerospace and defense contractor. With about 70% of its $60 billion in revenue from the U.S. government, the company is well positioned to benefit from U.S. defense budget growth, historically 5-6% per year, as well as increased global military spending. With a $144 billion backlog and deliveries forecast to reach 180 aircraft per year in 4- 5 years, we believe the company could grow at a significantly higher rate than overall defense budget growth over the next several years. The Street expects mid-single-digit revenue growth for the company, in-line with overall market growth. Due to its exposure to faster-growing programs, we believe the company can exceed that growth rate, and add margin expansion from increased scale. Further, strategic acquisitions, debt pay down, a 2% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.

We are also excited about LMT’s new – CEO James Taiclet – a military veteran and, over the previous 10 years the highly respected CEO of American Tower, a long-time Fund holding. Under Jim’s leadership, AMT grew its market capitalization from $2 billion to $100 billion and as both a shareholder and US citizen we look forward to him bringing his vast array of leadership skills to LMT.”

2. Raytheon Technologies, Corporation (NYSE:RTX)

No of HFs: 55

Total Value of HF Holdings: $2.98 Billion

RTX was mentioned in the Top 10 Stocks New Mets Owner Steve Cohen Was Buying in Q3. The top hedge fund holder of this stock is Eric W. Mandelbatt’s Soroban Capital Partners, which had over $801 million, invested in the stock at the end of September. An insider purchased 1,000 shares at around $52. The stock is up more than 34% since then.

Check out this article, where Third Point talked about the stock:

“We  are  pleased  that  the  Board  of  Directors  decided  to  split  United  Technologies Corp. (“UTC”) into three separate, focused companies. Unfortunately,  the  initial  announcement caused  confusion  and  created  uncertainty  about  the  free  cash  flow  generation  of  newly-acquired Rockwell Collins. We believe management has largely rectified this by shortening the time to separation and providing better disclosure on Rockwell Collins’s free cash flow generation. We have urged management to quantify the elimination of stranded costs and explore  a  highly  value-creating  transaction  for  Carrier, and  believe  they  are  receptive  to these suggestions. Despite the separation announcement, UTC’s sum-of-the-parts  discount  has  continued  to widen  and  the  valuation  gap  versus  UTC’s  closest  multi-industry   peer,   Honeywell International, has reached a new 10-year high. The coming separation will shine a greater spotlight on the large valuation gap to UTC’s pure-play peers. During the separation process, we  expect  the  management  team  to  highlight  UTC’s  asset  quality  and  to  increase transparency  around  Pratt & Whitney’s very significant multi-year  inflection  in  free  cash flow generation.

1. DISH Network Corporation (NASDAQ:DISH)

No of HFs: 60

Total Value of HF Holdings: $1.59 Billion

DISH is one of the top television providers in American television. Recently the company announced that they have reached an agreement with Nexstar Media Group to provide users the ability to tune in to Nexstar owned programs, including news, entertainment, and sports. Brian Neylon, Group President, DISH TV said,

“We’re pleased to have reached an agreement that benefits all parties, especially our customers. Thank you for your patience and understanding as we worked through the negotiations.”

The top hedge fund holder of this stock is Boykin Curry’s Eagle Capital Management, which had over $468 million, invested in the stock at the end of September. An insider recently purchased 300,000 shares at around $31. The stock is up 6% since then.


18 MONTHS OR MORE OF UNPRECEDENTED OPPORTUNITY

A revolutionary initiative is helping average Americans find quick and lasting stock market success.

275% in one week on XLF - an index fund for the financial sector. Even 583%, in 7 days on XHB… an ETF of homebuilding companies in the S&P 500. 



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