Editor's Note: this article is meant as an introduction to Cestrian Capital Research's new Marketplace service, Invest in the New Space Race.
We're launching our new Marketplace service, "Invest in the New Space Race", today.
Why? In short:
- The space sector has become investable - and we mean US companies trading their stocks on regular stock exchanges, not just VC or angel investing.
- Space is hot again. Reduced costs are driving civilian revenues, and superpower militarization is driving US government revenues.
- Space is in its early stages of long-run growth - and most people haven't noticed. Did you know there was a $9bn EV acquisition of a NYSE-traded US space-sector business last year? Or that the acquired business is now the main growth engine for the $62bn EV NYSE-traded acquiror?
We're building a community of space-sector investors - join us now to Invest in the New Space Race.
Why Invest in the New Space Race?
In short - space is hot again. We think the business of space is in the early stages of a long-run growth curve, with many years of expansion ahead.
Morgan Stanley and Bank of America Merrill Lynch each believe the space industry is worth in excess of $300bn right now and expect market size to grow to in excess of $1tn in the coming years. There are three drivers of space market expansion:
- Vastly reduced rocket launch costs and satellite construction costs have opened the space market up to civilian applications operated by commercial companies. Earth observation of agricultural crop performance, monitoring airliner and ship movements, more accurate weather forecasting – these are all civilian applications live in space right now.
- Superpower re-armament and the militarization of space – there is a quiet arms race going on between the US, China and Russia and the high-technology end of the new weaponry involves space. Hypersonic missiles, anti-satellite weapons and a pending Space Force wing of the US military – these factors are all driving more federal dollars to the space sector. This was the driver of the original Space Race and it is no different this time around.
- The US government has prioritized using commercial vendors over and above developing and manufacturing space systems and services itself. Naturally the federal government prefers to deal with larger prime contractors – so the big defense contractors, all of whom have large space divisions, are enjoying a meaningful boost from this spend. Right now their stocks are way down from their highs, and they pay meaningful dividends too.
If you ask around, most people will tell you that to invest in space, you have to be putting money into small private companies in angel rounds or VC fundraisings. Certainly there is a whole lot of money going into early-stage space startups.
But what isn’t common knowledge is the notion that space is now a viable proposition for investors focused on US companies with tradable securities. And that, in short, is our focus – as we explain below.
Our Service is 100% Focused On The Space Sector
We believe focus matters.Our service, “Invest in the New Space Race”, is 100% focused on US public companies operating sizeable space businesses. We only cover equities. And we’re only interested in long investments, be they long-term holds or short-term trades.
This means we don’t spend ANY time figuring out a new sector, a new geography, a new type of security, or trying to battle with a short vs long position or hedging out shorts vs longs or anything else so complicated. And that means we have a lot of time to spend delving deep into the space sector and deep into the companies that play in it. We analyze company financials, industry reports, stock performance, Wall Street opinon and talk directly and frequently to the companies we cover.
Our coverage universe includes:
- Large-caps with multibillion dollar revenue space divisions such as Boeing (BA) ($220bn EV) and Lockheed Martin (LMT) ($106bn EV).
- Mid-caps also with multibillion dollar revenue space divisions, such as Northrop Grumman (NOC) ($62bn EV) and Raytheon (RTN) ($52bn EV).
- Small-caps which could be pureplays such as Aerojet Rocketdyne (AJRD) ($2.5bn EV) or Maxar Technologies (MAXR) ($3.3bn EV), or companies which have significant revenues from space lines of business, such as Science Applications International Corporation (SAIC) ($6.2bn EV).
We believe there are attractive long-term and short-term gains to be had in our equities universe.
In addition, we believe dividend investors have a lot to look forward to in the sector, particularly from the large and mid caps.
Finally, we believe there will be significant M&A in the space sector as the defense majors continue to add products into their space divisions – providing upside opportunity for the pureplays in the space business. (It may surprise you to learn that there was a $9bn EV M&A deal in the space sector in 2018, the acquisition of Orbital ATK [OA] by Northrop Grumman [NOC] – this provided a +22% pop for selling Orbital shareholders and the acquired business has continued to power growth at buyer Northrop Grumman too).
What We Will Provide
Subscribers will enjoy:
- Continuous coverage universe of 25-30 US stocks, each commencing with an Initiating Coverage note, with a focus on share price performance, dividend performance and M&A potential.
- Earnings Previews and Post-Earnings Reviews for every company we’ve initiated, every quarter.
- Long-term investment and short-term trading opportunities in the sector, with real-time updates on ratings changes.
- Our conversations with the companies folded into our analysis. We’ve been working with CEOs, boards and management teams as an investor for 20 years and although public companies cannot tell us anything price-sensitive, our experience helps us understand the nuances of their commentary over and above the raw numbers. We factor this into our ratings.
- Live chat service. We see this as a high value area – discussion with investors in the same sector is a rewarding experience. We strongly encourage you to spend time in our chat room.
- And more benefits as our service expands.
What Will It Cost?
We’re committed to developing our community of space-sector investors as quickly as we can. We believe investing insights can sharpen as the community develops, particularly on the chat service. (This is certainly our experience as a user on other Seeking Alpha Marketplace subscriber chat boards). So we want to encourage people to sign up and to use the service.
We’re setting our prices at a modest level for this reason. Monthly subscriptions cost $35/month, and we offer a discounted annual subscription at $299/year (a 28% reduction on the monthly). We’re offering a further 10% introductory discount for new users who sign up right away.
We will increase prices over time for new users – the earlier you sign up, the lower your cost.
And Finally… Who Are We … And Why Should You Trust Us?
Cestrian Capital Research, Inc is a fully independent equity research company incorporated in California as a C-Corporation. We’re regulated by the SEC as an Investment Advisor. This means we have SEC filing responsibilities and compliance procedures. In short, it means we take our business very seriously.
Our sole business is independent equity research. We don’t manage client assets and we don’t trade our coverage universe for our own account. In short, we don’t lean to the sell-side and we don’t lean to the buy-side. Our readers, followers and subscribers are people like you who are looking for truly independent insight.
We are institutionally trained. We developed our investment experience in the technology industry and believe that the current stage of evolution of the space industry is akin to the early days of tech as an independent industry – this helps frame our thinking and investment ratings.
And we are highly selective. You will see us apply few Buy ratings at any given time and you will see us differentiate clearly between long-term buys and short-term trading opportunities. We’ll always set our our numbers and our logic clearly for you to factor into your own investment decisionmaking. And we encourage all our members to engage with us, on chat or direct message.
We look forward to signing you up and talking on chat!
Cestrian Capital Research, Inc – 30 April 2019
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.