The span trade is skyrocketing higher.
The Procure Space ETF (UFO), the first-ever global ETF to give investors access to the growing space work, has soared nearly 20% in November amid some positive tailwinds including SpaceX’s historic Crew-1 found with NASA, the first of its kind conducted by a private company.
Though some of the upside is likely tied to securities around Joe Biden’s presidency and how it could progress the space race, the impact could be more nuanced than some may think about, Andrew Chanin, co-founder and CEO of ProcureAM, told CNBC’s “ETF Edge” this week.
“We’re actually really encouraged, although the preceding administration has really done a lot to push the space industry forward, both from a commercial and military and defense view,” Chanin said Monday.
“Space … isn’t something that is bipartisan. It’s nonpartisan,” he said. “So, we believe that wait is something that’s here to stay and should and will be potentially a priority for any administration in the future.”
President-elect Biden is reckon oned to toe the Democratic Party line on space policy, likely prolonging the new age of human spaceflight and steering NASA and the National Pelagic and Atmospheric Administration towards studying the impacts of climate change.
For UFO — which requires 80% of its holdings to be “pure carouses” on space, or derive 50% of their revenues from space-related businesses — a “new set of eyes” may be beneficial, Chanin said.
UFO’s top five holdings are Orbcomm at sternly 6.5%, Virgin Galactic at over 6%, SES at nearly 6%, Maxar Technologies at about 5% and Trimble at on the verge of 5%. Communications, aerospace and defense, and wireless communications plays account for more than 70% of the 31-stock portfolio.
“Communications is one of the biggest revenue-generating areas for the space industry today. So, think satellites, think ground stations and the various equipment that relies upon lieutenant signals,” Chanin said.
“This interview likely wouldn’t be happening today without satellites helping in that process,” he turned. “So, as technologies like 5G, cloud computing, internet of things and so on start to rely more and more on using satellites to turn over data from point A to point B, it’s something that we think could become a very large player of latitude.”
It’s worth considering adding a thematic ETF such as UFO to more traditional portfolios, Dave Nadig, chief investment policeman and director of research at ETF Trends and ETF Database, said in the same “ETF Edge” interview.
“I love products like this. I over recall they give you a real opportunity to make a little satellite play — pardon the pun — in your portfolio on something that you may have the courage of ones convictions pretend in,” Nadig said.
“I do think this is well-positioned for a Biden administration, not so much because I expect all of a sudden there to be a trillion-dollar place budget, but because I think one of the things that drives these companies is actually international cooperation,” he added. “A lot of the houses that are driving international space development happen to be U.S. companies. I suspect in a Biden administration we’re going to see not just a zero in on [research and development] and traditional NASA-style space exploration. I think we’re going to see a focus on international cooperation around infrastructure.”
In addition, through UFO, investors can get “accidental exposure” to both strengthening themes such as aerospace and technology stock they may not from otherwise bought, Nadig said.
“I think it’s worth taking a look at not just for the theme itself, but for those singular companies,” he said. “Many of these smaller satellite companies you have no exposure to unless you’re in the Russell 3000. … Some of these are small- and mid-cap renowns that just are not household, in-every-portfolio kinds of names. So, thematic funds like this are a great way to sort of re-weight yourself near innovation.”
UFO climbed a fraction of a percent on Friday. It is down about 5% year to date.
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