In this piece, we will take a look at the ten best space stocks to buy according to hedge funds. If you want to skip our industry introduction and jump ahead to the top five stocks in this list, then take a look at 5 Best Space Stocks to Buy According to Hedge Funds.
The space industry is undoubtedly the hottest industry in public discourse these days, spurred by Space Exploration Technologies Corporation's (SpaceX) remarkable feat of landing first stage rocket boosters. This has generated significant public interest, since watching rockets landing is a novel experience that was out of reach just a decade ago.
Naturally, these advancements, combined with those in computing and manufacturing, have also led to optimistic growth figures for the industry itself. Leading the charge with these reports is the investment bank Morgan Stanley, which estimates that the revenue generated by the global space industry can cross a whopping $1 trillion by 2040. In its report, the bank estimates that the cost to launch a satellite has dropped to $60 million and can potentially go even lower to sit at $5 million and that the bulk of the projected growth will come through satellite internet - particularly as launch costs drop just as the internet services themselves become profitable.
Backing Morgan Stanley is Citi, who also believes that a drop in launch costs and the proliferation of satellite broadband will drive the space sector to generate the eye popping $1 trillion revenue estimate.
Research firm Fortune Business Insights also focuses on the space industry, and it narrows down its focus on the launch services market. Right now, this segment in the U.S. is served by a handful of companies such as SpaceX, Boeing, and Lockheed Martin, with other firms currently developing and testing their rockets. The research firm believes that the launch services segment was worth $13 billion in 2021. The firm estimates the sector will grow to $14 billion by the end of this year, and from then to 2029, it will continue to grow at a compounded annual growth rate (CAGR) of 12.25% to sit at an estimated $32 billion at the end of the forecast period.
Any mention of space would be incomplete without the National Aeronautics and Space Administration (NASA). NASA is currently about to launch its Artemis 1 rocket to the Moon, and the development of this rocket involved NASA working with more than 1,100 suppliers across America. Some of these, as you'll find out below, are also part of this list, and the Artemis 1 launch is just the beginning, with the space agency hoping to eventually land humans on the Moon in partnership with SpaceX and another, to be decided, supplier.
Therefore, it's worthwhile to take a serious look at the space industry, and some famous companies on our list are The Boeing Company (NYSE:BA), Lockheed Martin Corporation (NYSE:LMT), and Amazon.com, Inc. (NASDAQ:AMZN).
Our Methodology
We studied the space industry to narrow down which firms are operating in it and then consulted our hedge fund survey of 895 funds to determine which stocks are on their radar.
10. Maxar Technologies Inc. (NYSE:MAXR)
Number of Hedge Fund Holders: 15
Maxar Technologies Inc. (NYSE:MAXR) is an American satellite imaging company that has been in business since 1957 and is currently headquartered in Westminster, Colorado. The firm provides governments and companies with satellite images, satellites, robotics systems, and other systems and subsystems.
Maxar Technologies Inc. (NYSE:MAXR) was pivotal in letting the Ukrainian army defend its territory from the Russian invasion, as its spacecraft regularly provided images of not only troop movements, but also of the impact of Russia's actions on Ukraine's agriculture sector. The company generated $64 billion in revenue in 2021, which marked 147% growth.
By the end of Q2 2022, 15 out of the 895 hedge funds polled by Insider Monkey had invested in the company.
Out of these, Jeffrey Jacobowitz'sSimcoe Capital Management is Maxar Technologies Inc. (NYSE:MAXR)'s largest investor. It owns 2.7 million shares that are worth $72 million.
Maxar Technologies Inc. (NYSE:MAXR) joins Lockheed Martin Corporation (NYSE:LMT), The Boeing Company (NYSE:BA), and Amazon.com, Inc. (NASDAQ:AMZN) in our list of top space stocks.
9. Iridium Communications Inc. (NASDAQ:IRDM)
Number of Hedge Fund Holders: 20
Iridium Communications Inc. (NASDAQ:IRDM) is a voice and data communications services provider that is headquartered in McLean, Virginia, the United States. The firm provides satellite handsets, date satellite communications, and prepaid mobile voice satellite communications.
Despite the technology sector undergoing a bloodbath this year, Iridium Communications Inc. (NASDAQ:IRDM)'s shares have rallied by a strong 13% on the market year to date, managing to buck the trend. The company won a portion of a big contract from the Department of Defense's Space Development Agency earlier this year. This contract was worth $324 million, and it will involve Iridium Communications Inc. (NASDAQ:IRDM) developing a ground space infrastructure for national security.
Iridium Communications Inc. (NASDAQ:IRDM)'s second fiscal quarter saw the company bring in $174 million in revenue for 17% growth driven by an increase in its billable subscribers. Insider Monkey studied 895 hedge fund portfolios for their second quarter of 2022 holdings to discover that 20 had held a stake in the company.
Iridium Communications Inc. (NASDAQ:IRDM)'s largest investor is Kevin Kuebler and Ming Lam's Silver Heights Capital Management which owns 2.4 million shares that are worth $93 million.
Baron Funds mentioned the company in its Q2 2022 letter. Here is what the fund said:
“Iridium Communications Inc. (NASDAQ:IRDM), a provider of global communications via its low-earth orbit satellite constellation, serves an addressable market that we estimate is at least 5 times larger than its current business. Growth is benefiting from growing demand for communications services in regions of the world that lack terrestrial network coverage, as well as the emerging Internet-of-Things. We estimate that almost 80% of Iridium’s revenue is recurring, including almost 20% of revenue that is on multi-year contracts with the U.S. Government.”
8. Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD)
Number of Hedge Fund Holders: 26
Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) is an American propulsion systems company that has been in business since the early days of the space industry. It was set up in 1915 and is headquartered in El Segundo, California.
Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) was responsible for providing NASA with the engines for the iconic Space Shuttle program that enabled the space agency to build the International Space Station (ISS). These engines are also used by NASA's SLS rocket for the Space Launch System, which is intended to be America's rocket to the Moon.
Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD) is also responsible for manufacturing America's largest rocket engine. This engine, the RS-68, is capable of generating a whopping 750,000 pounds of thrust at liftoff and is used by the United Launch Alliance's (ULA) Delta IV Heavy rocket. Insider Monkey's June quarter of 2022 survey saw 26 out of 895 hedge funds holding Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD)'s shares in their portfolio.
Warren Lichtenstein's Steel Partners is Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD)'s largest investor. It owns 3.9 million shares that are worth $160 million.
7. Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Holders: 30
Teradyne, Inc. (NASDAQ:TER) is an automation test equipment provider whose products let aerospace companies test their products during and after manufacturing. The equipment tests systems such as avionics and other hardware and software systems. The company is based in North Reading, Massachusetts.
Teradyne, Inc. (NASDAQ:TER) has proved to be one of the fastest growing companies in the industry, owning mostly due to the growth of the semiconductor industry. The company's revenue and net income have grown at CAGRs of 20% and 32%, respectively, between 2018 and 2021.
Additionally, the fact that chipmakers are moving towards mass producing 3 nanometer semiconductors will provide Teradyne, Inc. (NASDAQ:TER) with strong pricing power for its products, since these chips are significantly smaller than their predecessors and as a result require more advanced equipment. 30 out of the 895 hedge funds polled by Insider Monkey in Q2 2022 had held a stake in the company.
Teradyne, Inc. (NASDAQ:TER)'s largest investor is Panayotis Takis Sparaggis's Alkeon Capital Management which owns 2.9 million shares that are worth $264 million.
Carillon Tower Advisors mentioned the company in its Q1 2022 investor letter, outlining that:
Semiconductor test equipment and industrial robot producer Teradyne (NASDAQ:TER) fell after offering lower than expected revenue guidance due to fewer orders from its largest customer. Semiconductor equipment companies as a group underperformed as investors feared a general slowdown in semiconductor demand if the global economy slows.”
6. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 45
Northrop Grumman Corporation (NYSE:NOC) is an American aerospace company that provides a wide variety of products to the Pentagon, NASA, and commercial companies. It is headquartered in Falls Church, Virginia.
Northrop Grumman Corporation (NYSE:NOC) provides NASA with the solid rocket boosters for the SLS rocket. These boosters are used alongside the liquid engines to provide the rocket with sufficient thrust to escape the Earth's atmosphere. The company also built the lunar module that landed the Apollo astronauts on the lunar surface, and its Pioneer 10 satellite was the first to fly through the asteroid belt, provide the first images of Jupiter, and become the first spacecraft to leave the solar system.
Northrop Grumman Corporation (NYSE:NOC) also played a central role in building NASA's James Webb telescope, which is the most advanced telescope launched in history. Insider Monkey scanned 895 hedge fund portfolios for this year's second quarter to discover that 45 had bought the company's shares.
Out of these, Donald Yacktman's Yacktman Asset Management is Northrop Grumman Corporation (NYSE:NOC)'s largest investor. It owns 435,481 shares that are worth $208 million.
LRT Capital mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
The company’s revenue growth over the past decade has been mediocre but even that has led to impressive shareholder returns that have far outpaced the S&P500. What’s more, we believe that revenue growth may accelerate in the next few years. A lot of ink spilled every year about the “massive” U.S. defense budget7that critics claim is “out of control”8. Given this, you might be surprised to hear that U.S. defense spending as a share of GDP is at the lowest level in recorded history,9 at a mere 3.8%. In other words, U.S. military spending could double and not be out of line with historical norms. While we are not calling for a new Cold War, given the global instability we are witnessing, it is not unreasonable to expect defense spending to grow faster than GDP over the next decade.”
The Boeing Company (NYSE:BA), Lockheed Martin Corporation (NYSE:LMT), and Amazon.com, Inc. (NASDAQ:AMZN) are met by Northrop Grumman Corporation (NYSE:NOC) in our list of hot space stocks.
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Disclosure: None. 10 Best Space Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.
