While the spotlight in thematic ETF investing for much of 2023 and into 2024 has been squarely on artificial intelligence (AI), another theme is steadily gaining traction: space exploration.
Interest in this sector has been reignited, particularly following the successful partnership between Intuitive Machines (LUNR) and NASA's Odysseus mission, marking the first U.S.-made vehicle to achieve a soft touchdown on the moon in over five decades in February 2024.
This achievement has not only been a milestone for space exploration but also a boon for investors in LUNR, with shares witnessing a staggering 108% gain year-to-date (YTD), despite a recent pullback.
However, those who have invested in older space exploration companies like Virgin Galactic (SPCE) are all too familiar with the sector's inherent volatility. The high-risk nature of these investments means that today's gains can swiftly turn into tomorrow's losses, highlighting the need for a more diversified approach to investing in the final frontier.
Fortunately, for those looking to bet on the future of space exploration while minimizing idiosyncratic risk, there are ETFs specifically designed for this purpose. Below, we explore three of the best ETFs for investing in space, identified using the ETF Central screener. These unique thematic ETFs allow investors a way to participate in the space exploration theme without putting all their eggs in one basket.
ARK Space Exploration & Innovation ETF (ARKX)
ARKX is part of Cathie Wood's suite of thematic investment funds, distinguished by its high-conviction, actively managed portfolio and the usual 0.75% expense ratio.
The ETF currently holds orbital and suborbital aerospace companies, alongside firms developing enabling technologies and those poised to benefit from aerospace advancements. This approach encapsulates entities involved in everything from satellite operations to those enhancing space exploration through AI, robotics, and beyond.
Within ARKX's portfolio, Trimble Inc specializes in crucial GPS technology for space navigation; AeroVironment Inc focuses on unmanned aircraft systems and tactical missile systems for defense and commercial use; Kratos Defense & Security provides key defense solutions, including satellite communications; and Iridium Communications operates a satellite constellation for global communication.
Procure Space ETF (UFO)
UFO is a standout in naming thematic ETFs, with its ticker succinctly indicating its investment focus on space exploration. Unlike ARKX, UFO passively tracks the S-Network Space Index, which encompasses a wide range of space-related industries.
These industries span rocket and satellite manufacturing and operation, ground equipment manufacturing for satellite systems, space technology and hardware, space-based imagery and intelligence services, and telecommunications, including TV and radio broadcasting.
A significant portion, at least 80% of the index's weight, is dedicated to companies primarily earning their revenues from these sectors. To be included, a company must either primarily operate with space-based functions or produce products essential for or dependent upon space operations, from launch vehicles to satellite systems.
With 35 holdings spread across the Americas, Europe, the Middle East, Africa, and the Asia Pacific, UFO adopts a modified capitalization-weighted approach, adjusted for free float and the percentage of space revenue. Currently, it charges the same 0.75% expense ratio as ARKX does.
Notably, the index is open to potential future expansions, such as emerging sectors like space colonization and infrastructure, space resource exploration and extraction, space-based military and defense systems, and space tourism.
SPDR S&P Kensho Final Frontiers ETF (ROKT)
The concept of the “final frontiers” encompasses the vast and largely unexplored territories of space and the deep sea, each holding opportunities for discovery and innovation.
For investors looking to gain exposure to the industries pioneering in these realms, ROKT presents a unique alternative to the more singularly focused space-themed ETFs previously discussed.
ROKT tracks the S&P Kensho Final Frontiers Index, which is a hybrid benchmark designed to capture the significant segments of both the S&P Kensho Space Index and the deep-sea exploration components of the S&P Kensho Drones Index.
This amalgamation seeks companies engaged in developing products and services crucial for space travel and exploration, as well as those in the emerging market of remotely operated or unmanned aerial, underwater, and surface-level drones, including essential parts of their respective supply chains.
A key benefit of investing in ROKT is the broader diversification it offers across two pioneering industries, along with a lower expense ratio of 0.45%. This ETF also places a larger emphasis on established names in the field, such as RTX (NYSE:RTX), LMT, Heico, L3Harris, and Teledyne.
This content was originally published by our partners at ETF Central.