3 Publicly Traded Stocks for a Private Space Race

Advertisement

It’s amazing how a simple signature in Washington can cause an explosion in innovation. No, I’m not talking about new legislation – but rather, the loosening of federal oversight to finally allow in private enterprise and free-market influences.

Consider a seemingly arcane move in 2000, made by President Clinton, to change Global Positioning System data from “selective availability” to public record. That simple move opened the floodgates to spawn an entire consumer technology industry for GPS systems.

Bill Clinton probably never expected cars to have on-board GPS systems or phones to be able to literally direct us to the nearest coffee shop. But savvy investors who saw the big potential in privatization made a killing. Consider that from 2001 to 2007, Garmin (NASDAQ:GRMN) stock soared from less than $10 in 2000 to more than $120 in 2007, while the market added about 25% in the same period.

As the space shuttle Atlantis returns to earth this week and closes the curtains on government-sponsored space flight and two decades of NASA’s shuttle program, we may be faced with a new market-changing shift: the push towards privatized space programs. Just as the government set the stage for a boom in GPS-related businesses by opening the doors to private industry, so might the end of the shuttle program usher in tremendous opportunities for space stocks and related companies.

So which picks are the biggest players? Here’s three publicly traded companies that could benefit from the push into privatized space flight.

Orbital Sciences

A great small-cap space stock with potential in the private space race is Orbital Sciences Corporation (NYSE:ORB). Orbital Sciences develops and rockets and space systems for commercial customers, the military and NASA. The space stock mostly places satellites into orbit, but manned space missions wouldn’t be much of a stretch for this company. That means ORB is poised to be a big player in space flight.

Early indications are that Orbital Sciences is embracing this role, too. In December 2010, ORB submitted its plans for a space shuttle replacement to NASA. Orbital’s vehicle would launch atop an expendable rocket and return to Earth with a conventional runway landing like that of the shuttle. A shuttle replacement vehicle is initially needed to ferry astronauts to and from the International Space Station, and Orbital Sciences designed a vehicle with four seats. What’s more, alternative designs would allow room for commercial passengers in future years if private pleasure cruises to space become a reality.

What’s more, in April 2010, it acquired the spacecraft development and manufacturing business of General Dynamics (NYSE:GD). While that buyout could just be related to technology toward more efficient satellite launches, it also could be a move to beef up its development of private space flight operations.

It’s the early days in the push toward privatized space flight, but Orbital Sciences has a lot of experience in reaching for the stars. If it continues to innovate and build on its proven track record, ORB could be the first space stock to benefit from the space shuttle’s retirement.

Lockheed Martin

Lockheed Martin (NYSE:LMT) is no stranger to working with the government on aerospace programs. Its one of the largest defense contractors in the world, generating more than 70% of its revenue from the Department of Defense thanks in large part to iconic flying machines. Warbirds from Lockheed and its famous “skunk works” include the iconic F-16 and the F-117 stealth fighter. Its recent award of a staggering $320 billion joint strike fighter contract to deliver over 2,400 planes is an example of the kind of big deals Lockheed is used to striking with Washington.

But if you think fighter jets are all Lockheed can make, think again. Lockheed also submitted shuttle replacement plans to NASA a few months ago – its design includes returning a capsule to earth with a parachute landing like vehicles from decades past to simplify the technological requirements and reduce costs for space flight. It’s part of a legacy with the space program that dates back to 1955 when Uncle Sam awarded the then-named Martin Company with a contract to produce what would become the Titan rockets for the space race against Russia.

Then you have the now-infamous X-33 space plane, an effort on a sub-orbital aircraft with aims on eventually becoming a next-generation space shuttle. NASA had invested $922 million in the project before cancellation in 2001, while Lockheed Martin dumped a further $357 million of its own money into the program. Critics call this a boondoggle, but Lockheed claims to have continued the program and seen success from related technologies as recently as 2009. And you can bet that after all that money invested and all the potential revenue from privatized space flight, Lockheed has been scurrying to put its X-33 research to good use and improving on the decades-old designs.

Clearly Lockheed already has a foot in the space industry – and it doesn’t hurt that the company is one of the most well-connected industries in Washington, and knows its way around contract negotiations and government oversight. Any handoff of NASA responsibilities is sure to come with plenty of red tape, and Lockheed is an old hand at negotiating the overlap between federal spending and private industry.

That gives LMT a clear advantage in the space race that other rivals might not be able to match.

Boeing

Of course, you can’t overlook one of the other major aerospace contractors as one of Lockheed’s chief competitors in the race for private space travel: Boeing (NYSE:BA). After all, Boeing was a crucial part of the Apollo space programs that sent America to the moon – including building the first stage of the Saturn V rocket that launched the spacecraft and providing NASA with the lunar rover that bounced astronauts around the moon.

There has been a lot of fuss lately about how Boeing is taking a backseat to Airbus because it went big-time with its mammoth 787 Dreamliner instead of focusing on single-aisle aircraft for smaller fleets. The 250- to 330-seat 787 aircraft has a big order backlog but has been plagued by delays that have made some question whether Boeing management is asleep in the cockpit. But strong orders at the Paris airshow a month or so ago prove Boeing isn’t going anywhere.

In the space industry, Boeing is equally entrenched. Its 2000 acquisition of Hughes Space and Communications Company has made it one of the primary providers of commercial satellite launches for companies that include Sirius XM (NASDAQ:SIRI) and DirecTV (NASDAQ:DTV), among others.

And Boeing was awarded $18 million from NASA in the past year as seed money to advance the concepts and technology necessary to build a commercial space transportation system. Boeing isn’t alone, of course, and the contract was one of several efforts by the government to jump-start new spaceship development and fill the void left by NASA’s retiring shuttles. But clearly such acknowledgement from Washington and such a considerable sum gives Boeing a leg up in the new private space race.

At the heart of Boeing’s new spaceship design is the CST-100 capsule, which will look similar to the cone-shaped Apollo and Orion spacecraft that made Boeing’s mark on the moon missions. If Boeing plays its cards right, the CST-100 could be the next step in its space legacy as it connects private industry with the stars.

Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the stocks named here. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.


Article printed from InvestorPlace Media, https://investorplace.com/2011/07/3-stocks-for-space-race/.

©2024 InvestorPlace Media, LLC