Humans are curious so they’ve had a high interest in space exploration for decades. Our need to know is unrelenting therefore it makes sense that we will be traveling through space eventually. The stocks to buy as direct investments into space are scarce. However, there are hundreds of other industries that revolve around supporting those efforts. Today we explore how ARK ETF Trust – ARK Space Exploration & Innovation ETF (BATS:ARKX) stock gets investors a shortcut into that investment idea.
First a little background about the company that brought the ETF to life. ARK Invest burst onto the scene recently but they have been around for a while.
Per their words on the website front page, they solely invest in disruptive innovation. This makes for a risky portfolio because all their eggs are in a very speculative basket. This is not my judgment, but their own words.
Innovation and disruption mean that they believe in things that will be favorable in the future. These are companies usually pursuing something different, therefore, the current financial conditions don’t yet support the valuations.
To their credit, ARK had a massive home run and the high profile case in Tesla (NASDAQ:TSLA). Kudos to them for getting it right so they deserve benefit of the doubt.
As for the opportunity in space exploration, well I’m an engineer so I’m definitely a fan of it. So far we’ve only had three high profile companies and only one is public. Blue Origin and SpaceX are leading the charge but they are still private. Virgin Galactic (NYSE:SPCE) is the only ticker that I have directly traded for that purpose. Buying ARKX stock now leverages the homework of a popular investment house.
ARKX Stock Value Is in the Sum of the Parts
The basket they chose includes names that we recognize like Boeing (NYSE:BA) and Lockheed Martin (NYSE:LMT). The top 10 account for half the value of the ETF. This gives us a level of comfort that there are actual fundamentals behind the investment. Earlier I mentioned leverage but not the risky kind.
The second largest component in ARKX stock is the 3D Printing ETF (BAST:PRNT). Most would have missed this nuance. But when out in space people would need the ability to price parts on demand. Logic like this goes a step ahead to include other surprise companies like JD.com (NASDAQ:JD).
The ETF itself is too young to qualify as a conviction buy by my standards. But there’s always room for a speculative bet on the future. Over the years, I’ve done homework on individual stocks within ARKX. Most of them are solid and have support below and upside opportunities. For example, Boeing broke out from $244 per share and should have room for $60 more. JD.com stock defended the $78 level well so it could swing back toward $100 by summer.
These are just two examples to show how there could be profits even without headlines about actual space travel. ARK Invest is most likely in it for the long run. Luckily for investors who follow them, they report on their progress daily. This level of transparency is comforting because we can actually track them step by step. I applaud change especially on Wall Street because it’s been a dark cloud for ever.
Thinking Outside of the Box Is Refreshing
It is refreshing to see some transparency that makes the community more accessible. The real innovation is within ARK Invest’s style. Gut says that Wall Street will follow in its founders Cathie Woods‘ footsteps. There is a lot of distrust between individual investors and big banks who rate the stocks and investment opportunities. It’s a weird relationship if you think about it, and there is none of that with ARKX stock. We can even check on their progress daily just by reading a few email updates.
Can we find space exploration opportunities on our own? Maybe, but buying individual stocks instead of the ETF is tedious. I prefer to leave it to the professionals, so to speak. Can I bake an apple pie? Yes, but it’s probably not going to be better than someone who specializes in it. I don’t have enough time to explore each space prospect. Leveraging other people’s hard work makes total sense. ARKX stock is one to buy and hold for a very long term.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.