Insights

Cathie Wood announces space ETF, what about the ASX space sector?

Cathie Wood of ARK Invest just announced a new space exploration ETF. We take a look at what’s on offer when it comes to the ASX space sector.
The post Cathie Wood announces space ETF, what about the ASX space sector? appeared first on The Motley Fool Australia. –

Astronaut floats in space looking down on Earth

Thursday night last week, space stocks popped on Wall Street. Shares in Virgin Galactic Holdings Inc (NYSE: SPCE), Maxar Technologies Inc (NYSE: MAXR), and Stable Road Acquisition Corp Class A (NASDAQ: SRAC) all jumped more than 19%.

The reason? The announcement of an actively managed space exploration ETF from Cathie Wood’s ARK Investment Management. Although the holdings of the ETF are unknown, the market obviously has already begun speculating. Which leads us to the question, what sort of exposure does the ASX space sector offer?

But before we get ahead of ourselves, let’s cover why investors are paying attention to what one managed ETF is doing.

A bit of background on Cathie Wood and ARK

If the name Cathie Wood doesn’t ring a bell, I would be very surprised. The founder and CEO at ARK Invest has become known as somewhat of a modern Warren Buffett. Although, between the two, there aren’t too many similarities in investing style.

Buffett is known for his investments in cash-generative businesses that are fundamentally undervalued and being a champion for passive investing through index funds. On the contrary, Cathie Wood invests heavily based on growth.

Cathie Wood began her rise to prominence in 2019 when ARK Invest set a bull case pre-split price target on Tesla Inc (NASDAQ: TSLA) of US$7,000. At the time, Tesla shares were trading between US$200 to US$250. Many market commentators shrugged this off as crazy, unrealistic, and a pipe dream.

People started to wake up and pay attention to Cathie and ARK Invest through 2020, as Tesla broke out and ran, while Cathie’s actively managed ETFs substantially beat the broader market returns. For example, the flagship ARK Innovation ETF returned 133% in 2020.

It’s out of this world

According to ARK Invest’s website, the space exploration ETF will seek to provide exposure to companies involved in space-related businesses. These include reusable rockets, satellites, drones, and other orbital and sub-orbital aircraft.

ARK stated that the ETF would be looking for companies that are “[l]eading, enabling, or benefitting from technologically enabled products and/or services that occur beyond the surface of the Earth.”

The ETF will be actively managed, and the typical number of holdings will be between 30 to 50.

So, are there any companies on the ASX that would fit the bill?

It’s slim pickings for ASX space shares

Unfortunately, the truth is there aren’t too many ASX-listed companies that have exposure to space exploration. However, we’ll cover a few that dabble in that realm.

Electro Optic Systems Hldg Ltd (ASX: EOS)

Electro Optic Systems (EOS) develops and produces a range of electro-optic technologies in the aerospace sector. The company is Australia’s largest aerospace entity and the largest defence exporter in the southern hemisphere.

EOS grew in 2019 by acquiring EM Solutions to build out its own satellite communications offering. In its half-year results, the company indicated that it would continue to monetise its space technology in the communications and defence sectors.

In late 2020, EOS announced its own Medium-Earth Orbit (MEO) satellite constellation, EOS SpaceLink. The company expects it to be launched and operational in 2024 with positive operating cash flow

As of the half-year report, the company indicated a $570 million project backlog. EOS shares are down 37.7% in the last year. The company now has a market capitalisation of $863.07 million.

Xtek Ltd (ASX: XTE)

Xtek is aiming to predominantly draw revenue from its manufacturing of ballistic materials using its proprietary XTClave technology. The unique method allows the protective material to be made with a higher projectile resistance-to-weight ratio.

However, the benefit of this technology is that it can be applied to many other applications outside of just ballistic products. According to the company, the lightweight product also bodes well for manufacturing materials to be used in spacecraft and other space-related equipment. In fact, in June 2020 Xtek, in conjunction with Skykraft Pty Ltd, was given a grant to develop a small satellite launch stack.

Shares in Xtek are down 17.39% over the last 12 months. The company now has a market capitalisation of $38.61 million.

Kleos Space SA (ASX: KSS)

Kleos is a bit of a unique company in terms of what it does. The company uses satellites to deliver a global image of covert maritime activity. This is used by intelligence agencies and governments when traditional geospatial intelligence doesn’t suffice, due to weather, distance, or sea state. Hence, Kleos brands itself as an RF reconnaissance data-as-a-service provider.

In May 2020, Kleos was awarded a contract on the Micro-Satellite Military Utility (MSMU) project. This entails Kleos’ data being made available to the MSMU project, which involves the Departments of Ministries of Defense of Australia, Canada, Germany, Italy, Netherlands, New Zealand, Norway, United Kingdom, and the United States.

Late last year, the company announced it had successfully placed 4 of its satellites into orbit after launching from India. This will enable Kleos and its government partners to detect maritime activity such as drug and people smuggling, piracy, and illegal fishing. 

The company anticipates revenue to be derived from the satellites from the first quarter of FY2021. Currently, agreements are in place with the US Airforce, L3Harris Technologies Inc (NYSE: LHX), and other government entities. The annual licensing fees for the first cluster of satellites will be between $128,000 and $971,000 per license and the number of initial licenses targeted is around 130. 

Kleos shares are up 71.62% for the last year. The company now has a market capitalisation of $97.34 million.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of June 30th

More reading

Mitchell Lawler owns shares of Electro Optic Systems Holdings Limited, Tesla, and Xtek Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla and Virgin Galactic Holdings Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Cathie Wood announces space ETF, what about the ASX space sector? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!