As a theme, space investing is still in its infancy, but it’s luring some of the biggest names in business, including the titans of the consulting.
In what could prove to be a long-term positive for exchange traded funds such as the ARK Space Exploration & Innovation ETF (ARKX), consulting stalwarts Bain, BCG, McKinsey, and Deloitte are all eyeing a piece of the space industry pie. In fact, Deloitte recently finished forming its space consulting division, which is led by Brett Loubert.
In an interview with Michael Sheetz of CNBC, Loubert outlined two-pronged opportunity set in space: space missions and business and space growth.
“The former represents clients that are designing and launching systems into orbit, or those where their primary product or service is space-based, or have a dedicated business unit focused on space. The latter, however, presents perhaps the more lucrative potential,” according to CNBC.
The $280.7 million ARKX, which typically holds 35 to 55 stocks, is pertinent in this conversation because it’s an actively managed ETF, meaning it can be responsive to emerging space trends while allocating to both of the aforementioned trends as the managers see fit.
For long-term investors, ARKX holds promise because, by some estimates, the space economy will be worth $1 trillion by 2040. Deloitte’s Loubert told CNBC that he views that estimate as conservative.
Another benefit of ARKX being actively managed is that the fund can more nimbly get in on the ground floor of younger, publicly traded space companies while avoiding some of the trouble spots in the industry — yes, those do exist. For example, Virgin Orbit is trying to stave off collapse and currently has much of its staff furloughed.
Obviously, Dow component Boeing (NYSES: BA) is a large-cap company with history as a blue-chip, but despite its dominance in the aerospace and defense realms, it’s seen as lagging rivals in the space industry, such as Elon Musk’s SpaceX.
In late March, Boeing delayed the launch of its Starliner capsule, adding to a string of postponements. That’s not a death knell for Boeing’s space ambitions, but it’s a sign that the company has work to do to shore up its space program. Currently, Boeing isn’t a member of the ARKX portfolio, but rivals Honeywell International (NASDAQ: HON) and Lockheed Martin (NYSE: LMT) are, indicating that the ETF doesn’t shy away from holding large-cap companies with track records of success in fields other than space.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.