How quickly things change. It seems like just yesterday when space stocks seemed like purely speculative investments. Today, many of the names are still speculative, small-cap stocks. However, this growing sector is projected to grow much larger as the decade progresses.
When you think about the space economy, it’s easy to think about the National Aeronautics and Space Administration (NASA). It’s still pretty cool to see the United States go back to the moon as it did earlier this year, even though it was an unmanned mission—at least for now.
But that’s only part of the story. A key catalyst for the space economy is the collaboration between the public and private sectors. Companies like Space-X and Palantir Technologies (NYSE:PLTR) play key roles in shaping the space economy.
That means investors have more choices than ever before among space stocks. Here are three names to consider right now.
Lockheed Martin (LMT)
Lockheed Martin (NYSE:LMT) is a large-cap stock that demonstrates how the lines between defense and space stocks are blurring. For example, the company’s space business includes lunar and space exploration on the one hand and layered missile defense systems on the other. That means that Lockheed gets contracts from both NASA and the United States Department of Defense (DOD).
As an investment, LMT stock illustrates the distinction between price and value. At over $400 per share, some investors may shy away. However, the stock trades at a forward price-to-earnings (P/E) ratio of just 17x, which is fair value for the sector. Plus, investors get a growing dividend that yields 2.69%.
Some investors may be concerned that Lockheed, the largest U.S. defense contractor, could be the victim of the U.S. government’s belt-tightening. That seems unlikely, no matter what the election outcome is in November. With that in mind, it is a good idea to focus on the 46.6% total return in LMT stock over the last five years.
Intuitive Machines (LUNR)
If you prefer long-term potential, Intuitive Machines (NASDAQ:LUNR) could be your investment choice. This small-cap company has a market cap of approximately $560 million. It is not yet profitable, but that may not be the case for much longer.
Intuitive Machines’ revenue is growing exponentially. For example, in the company’s first quarter of 2024, it generated almost as much revenue as it did in all of 2023.
And that’s likely to be just the beginning. The company garnered headlines when its lunar lander touched down on the moon’s surface, and it’s heading back later this year with yet another trip planned in 2025.
Investors who bought LUNR stock in 2021 at around $20 are holding a heavy bag. That won’t get much lighter even if the company hits analyst’s forecasts for 144% growth. But if you believe, as many do, that it won’t be a penny stock much longer, this could be an ideal entry point for one of the more promising space stocks.
SPDR S&P Aerospace & Defense ETF (XAR)
Sector-specific ETFs are often seen as poor, long-term investments. The rule is that the narrower the focus of the ETF, the shorter the investment. However, the SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR) exposes investors to space and defense sectors.
The space sector may not be evergreen, but the defense sector surely is. The United States defense budget is one of the largest line items in the national budget.
But here’s what makes the XAR ETF an intriguing play on space stocks. It’s a modified equal-weight fund. That means it assigns the same weighting to stocks regardless of their market cap. So, a company like Rocket Lab USA (NASDAQ:RKLB) receives the same weight as Lockheed Martin.
The XAR ETF has increased by 22.6% in the last 12 months. However, it will increase by just 9.65% in 2024, underperforming the broader market. The fund currently has $2.19 billion of assets under management, and its expense ratio is just 0.35%.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
