As emerging technology explodes onto the scene and interest in space exploration continues, investors are wondering where they can best gain exposure to the space economy.
ProcureAM co-founder and CEO Andrew Chanin joins Yahoo Finance to discuss Procure’s Space ETF (UFO) and why investors should consider adding it as interest in space exploration gains momentum.
“What the index looks at is primarily focused on… companies that get the majority of their revenue from space-related activities, businesses and services… about 80% of the fund looks at these more pure play space companies, but also recognizing that some of the biggest players in the space industry are your prime contractors, your diversified aerospace and defense companies,” Chanin explains. “But maybe not… 50% or more of revenue comes from that area , but the index looks for those diversified companies that still generate more than 20% of revenue from space, hundreds of millions per year in revenue from space. “
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor’s note: This article was written by Nicholas Jacobino
Video transcription
AKIKO FUJITA: SpaceX today postponed the launch of the Intuitive Machines lunar lander. Intuitive is competing to become the first commercial lander to reach the moon and hopefully fly tomorrow. To see how investors can make money from the space market, we bring in Andrew Chanin, co-founder and CEO of ProcureAM, for our ETF report here, brought to you by Invesco QQQ.
It’s good to talk to you today. And of course you have an ETF around space travel: UFO. However, I am now looking at your investments as we see that the ETF is off to a bit of a rough start here overall. How do you think investors should consider where the space opportunity currently lies, given that many of these companies are still privately held?
ANDREW CHANIN: Yes. This fund was launched in April 2019. So we’ve seen companies added to the index. We’ve seen businesses being removed. We have seen mergers between companies in the index, but also acquisitions of companies that have been taken private by private equity.
And so we’ve seen a lot of changes in the almost five years that the fund has been in existence. And the fund rebalances and restores balance, and it looks for these new opportunities. But right now, much of the growth in the overall space economy over the past few decades has actually come from communications companies.
And so that is a very important part of space that connects us here on Earth today. This interview wouldn’t happen without space technology and satellite connectivity. And it helps us today in so many ways. But I think a lot of people are looking forward to where the next growth areas for space might be. And a lot of people are looking at both silent communications and this emerging cislunar economy, with the launch of Intuitive Machines being something that we want to expand as far as possible with the moon.
AKIKO FUJITA: Let’s talk about that a little more, Andrew. I mean, you’re talking about satellite companies – that’s kind of where the big drivers have been when it comes to the advancement of space exploration. You also have a name like Rocket Lab, which actually builds the rockets that go to space. How do you think investors differentiate the two? And is the idea to diversify your portfolio a little bit and look at the beneficiaries as well as those who are helping these companies get them there?
ANDREW CHANIN: Yes. So you do have a number of picks and shovels. You have hardware. You have software. You have enablers. You know, what the index mainly looks at, it looks for companies that get the majority of their revenue from space-related activities, businesses and services.
So what you’re looking at is about 80% of the fund is looking at these more pure play space companies, but also recognizing that some of the biggest players in the space industry are your prime contractors, your diversified aerospace and defense companies. maybe 50% or more of their revenue comes from that area, but the index looks for those diversified companies that still generate more than 20% of their revenue from space, hundreds of millions per year in revenue from space. So there’s kind of a balanced approach to investing in the space, but with a strong focus on those that are more pure play.
AKIKO FUJITA: Andrew, what about some of those more traditional aerospace players, like Lockheed Martin and Northrop Grumman? When you think about the growth opportunities in the space industry, where does that place you in your investment outlook?
ANDREW CHANIN: Yes. So upon rebalancing, up to 20% of the index could be in these more diversified names. We have names like Lockheed and Raytheon and Boeing and Airbus. And they are already big players in the space. Many people are not very familiar with the fact that there is a joint venture between Lockheed and Boeing, the United Launch Alliance, which is also helping with the launch.
And we certainly hope that more companies in the space industry will come to the fair. But often these key players, these diversified players, benefit from the opportunity to pick up other space-related technologies. And we certainly hope that as time goes on, they’ll have a larger footprint as far as a percentage of their overall revenue from space. And when we look at how governments and militaries around the world view space, there is near consensus that space is seen as the new strategic pinnacle for military and warfare. So because we’re on the defense side of the spectrum, that means that space is something that they need to be exposed to in some way as those companies develop themselves.
AKIKO FUJITA: Finally, Andrew, so much attention is paid to reaching the moon. We’ve seen that Astrobotic wasn’t necessarily successful with their commercial lunar lander. We’re talking Intuitive now: there are many more lunar lander launches planned this year. Who benefits most from a successful landing there? And how can you position yourself as an investor for this?
ANDREW CHANIN: Well, hopefully humanity will certainly benefit from successful moon landings as far as we as a species can achieve. But certainly, launch companies that help send these crafts to the moon, the companies that develop hardware and software used in these missions – so much of this early stage, even a specific intuitive mission, they’re trying to pave the way for future moon landings – thus providing analysis of what lunar dust looks like when a lander actually approaches one of these craters, allowing us to place beacons so we have better navigation and communications capabilities on the moon.
So we’re actually hoping to lay down some of this infrastructure, which will also benefit future lunar missions. So these companies certainly hope to be successful and see all their experiments work. But this would be a huge milestone for a commercial moon landing.
It’s been since the 1970s that the US has piloted a successful moon landing – and very few countries have managed a soft landing on the moon, period. So if a commercial company from the US can achieve that, I think it’s something that people around the world will be looking at.
AKIKO FUJITA: Andrew Chanin, co-founder and CEO of ProcureAM, great to speak with you today. I appreciate the time.
ANDREW CHANIN: Thank you.