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Virgin Galactic shares have rocketed 375% in three months: Are space stocks an out-of-this-world investment or will they soon crash back to earth?

Investing in space is now as simple as calling your broker or investing in a fundVirgin Galactic shares have rocketed to $34 from $7 in two monthsProcure Space's UFO is the first ETF to to offer exposure to the space economyBut one expert warns backing the new space race is speculation not investing 

Flights into space have come down in price over the years - but booking up to casually rocket off for an out-of-this-world experience is still way out of reach for the average punter.  

Virgin Galactic is now quoting $250,000 - or £193,000 - for would-be space tourists, small change for the global elite but the price of a home for many. B

But despite this, its share price has skyrocketed. In the past three months, Virgin Galactic shares have risen 375 per cent from $7.22 to $34.29 - at the end of last week they were even higher at above $37.

The global space industry is set to rake in an expected revenue of more than $1trillion - £700billion - by 2040, according to claims by investment giant Morgan Stanley.

In a bull scenario, this could be as much as $1.75trillion. But is investing in space stocks a fad?

Virgin Galactic shares have rocketed 375% in three months: Are space stocks an out-of-this-world investment or will they soon crash back to earth?

Space: Virgin Galatic shares have rocketed in recent months - are they set to crash back to earth?

While the chances of being a space tourist is slim for most, the sector could provide investors with some opportunities. 

It could be an appealing prospect for those interested in the idea of exploring the galaxy, but as with any ambitious investment project it comes with plenty of risks.

We take a look at whether space is worth investing in. 

Floating – but not in a peculiar way

Start-ups in this space are mostly unlisted entities, such as privately owned aerospace manufacturer SpaceX, which was founded by Elon Musk in 2002 to provide space transportation services.

However, that is slowly changing. Last year Virgin Galactic became the first and only publicly listed human spaceflight company on the New York Stock Exchange.

Helal Miah, investment research analyst at the Share Centre, says investors can easily buy directly into Sir Richard Branson's company, which has the ticker: SPCE-US on the NYSE.

Many UK-based investment platforms offer the chance to buy into NYSE listed companies - but fees can be expensive, so shop around. 

On the whole, analysts appear bullish about Virgin Galactic and have drawn comparisons to the performance of electric vehicle and clean energy company Tesla, which has seen it's share price on the Nasdaq surge recently.

Up and away! The Virgin Galactic share price has rocketed in recent months

Miah adds: 'The share price dipped in December to $6.90 (£5.33) and since then it has rocketed on the back of positive test results of its flights.'

At the time of writing, the share price has gone stratospheric. It has recently reached almost $40 a share and is currently hovering at the $34 mark. 

One expert says the rise has been down to the stock receiving more attention from the banks and a scarcity factor.

Investing in a space fund

A fund investing directly and exclusively in the space industry was unheard of until last year, but now investors can become space cadets from the comfort of their sofa.

Launched 11 April 2019, on the Nasdaq under the ticker UFO, ProcureAM's exchange traded fund became the first fund of its kind to offer investors pure-play exposure to the global space industry.

Andrew Chanin is the CEO of ProcureAM which launched the first ETF investing in the space sector

UFO tracks the S-Network Space Index where 80 per cent of index constituents are required to generate the majority of revenue directly from space-related activities across multiple industries.

The index is mainly dominated by American firms specialising in communication services and industrials, such as Maxar Technologies, Virgin Galactic Holdings Inc., AT&T Inc., Boeing Co and Honeywell Intl Inc.

An ETF is similar to a traditional fund in that it is a collective investment vehicle that pools together many investors' funds. 

But unlike most traditional funds, ETFs are passively managed, meaning they track an index rather than have managers picking and choosing shares or bonds.

To date ProcureAM's UFO has attracted $20million (£15.49million) in assets. 

Andrew Chanin, chief executive of ProcureAM says: 'It's still early days with the fund under one year old but growing steadily in assets. 

'We launched it at $25 (£19.37) [per share] and it's now $27.12 (£21.01) so up 8.5 per cent since launch.'

Sir Richard Branson sports the latest gear from Virgin Galactic. But will Virgin Galactic's plans to have him on the first space tourism flight go ahead in 2020? 

Chanin says the fund gives investors the ability to spread their risk. 'This sector is really intriguing. 

'However, when you invest at an individual company there are so many things that can affect success or failure.

'It could be management or scandals. It could be rogue actors. The technology may not work or costs may be too high to bring the tech to light. 

Someone who wants to invest in space doesn't have to put eggs in one basket 

Andrew Chanin, space fund manager

'A competitor's tech may be better, faster and cheaper and hinder the company's ability to flourish in the industry.

'There is no industry that is risk-free. Some may be riskier so that is why I'm so excited to offer an ETF wrapper. Someone who wants to invest in space doesn't have to put eggs in one basket. 

'There is a lot of diversification and lots of players specialising in different areas from different parts of the world trying to find solutions to problems.'

Investing in space indirectly

The human race has to think about solving several major problems that could accompany the leap back to the moon and elsewhere.

We have to prepare for things like getting mining equipment onto asteroids to extract minerals, communicating in outer space and surviving in harsh climates as we set up new stations.

If investing in a UFO ETF or Virgin's first space tourism flight sounds a bit too 'out of this world' the other way to get some exposure to the space economy, is to invest in companies that partner with or own a stake in the companies in the industry.

For example you can invest in Alphabet which, according to Morningstar, has a nine per cent stake in Space X.

If analysts from Morgan Stanley are correct the space sector could boom in the next two decades

Partners of Virgin Galactic include established companies like Land Rover, which provides vehicles to support its operations at the Mojave and Spaceport America in New Mexico, and Microsoft Edge which is the company's website partner.

With the Trump administration announcing the creation of Space Force - a branch of the US armed forces - America's Department of Defense has asked for an initial investment of $14.1billion (£10.93billion).

This could boost revenues of companies specialising in aerospace, communications, and defence.

Garrett Goldberg, partner at the San Francisco venture capital fund Bee Partners says: 'Companies most likely to benefit from the new United States Space Force will likewise be stalwart standbys that have supported military and federally funded initiatives in the past. 

'These include Boeing, Northrop Grumman, General Dynamics and Lockhead Martin.'

With the creation of President's Trump Space Force there could be a number of companies benefiting from the Department of Defense's spending

For investors loyal to Britain, few options in space remain. 

Miah says: 'Space is very commercialised when looking at communications and satellite technologies and an easy answer to this question until recently for UK investors would have been to take a look at Inmarsat, a company we recommended for a while.

'However, now that they have been taken over the alternatives would be other non UK listed companies such as Eutelsat, Iridium Communications and SES Sa.'

Miah adds that smaller companies like KQinetiq Group may be a good bet. 'It's a UK government spin off and their share price has been doing very well. 

'Over the last two years they have nearly doubled. Otherwise, BAE and Rolls Royce may have exposures as well.'

Should you boldly go and invest?  

Virgin Galactic's rocketing share price demonstrates that it is possible to make money in this sector directly. 

There's even speculation that competitor Space X will list in the near future, which could up the appeal of the sector. 

But the industry is as unpredictable as space travel itself and investors should be open to volatility because there are things that could go wrong.

When it comes to Virgin, for example, its meteoric share price rise could be negatively affected by any safety flaws identified on its rockets or delays prior to its first tourism flight, which is set to have Branson himself on board.

As for the space industry, there's constant innovation but this can leave it open to bigger and unpredictable problems. But that doesn't mean the sector doesn't deserve attention.

One invention could change life as we know it forever. 

As Morgan Stanley points out, the impact of Elisha Otis' demonstration of the safety elevator wasn't immediately felt. 

But 20 years later every multi-story building in New York, Boston and Chicago was constructed around a central elevator shaft.

There are several fads today including, but not limited to, cryptocurrencies and marijuana stocks. You can add space stocks to that list.

Professor Robert R Johnson 

Growing public interest is also bound to ensure more growth in the space sector.

Industry commentators are convinced that space travel will become accessible to the general public in our lifetime.

Adam Jones, Morgan Stanley's equity analyst points out: 'Just as further innovation in elevator construction was required before today's skyscrapers could do the skyline, so too will opportunities in space mature because of access and falling launch costs.'

Flights into space may cost more than £190,000 now, but future take-offs are bound to cost less as technology becomes more efficient, reusable and safer. 

Miah says: 'It's the early days of space tourism. The mass affluent market is coming but it will take time to prove the tech is safe.'

Is it all just hype(r drive)? 

Some advise caution when investing in this sector. Goldberg feels retail investors should avoid companies promising 'flashy moonshots'.

He says they should instead invest in the businesses that are set to service these ambitious companies, and adds: 'Leadership excellence and experience that companies like Boeing and other aerospace leaders have provided for generations, will help retail investors place their bets with care. 

Robert R. Johnson, professor of finance, Heider College of Business, Creighton University in Nebraska warns that investing in space could just be another fad.

'There are several fads today including, but not limited to, cryptocurrencies and marijuana stocks.

'You can add space stocks to that list. Investing in fads generally doesn't end well for investors.

Putting money into entities in the space industry is more aptly characterised as speculation rather than investing 

'Putting money into entities in the space industry is more aptly characterised as speculation rather than investing. 

'Specifically, there is very little to base any sort of current valuation — that is, tangible returns or cash flows that one can rely upon to value companies in a nascent industry like space.

'Despite my scepticism, the space industry may flourish in the future and may very well transform the way we do both leisure and business. 

'But assuming that happens, we have no idea which companies will be the ultimate winners.'


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