There's a resurgence of investor interest in the space industry, in part because its market size will reach an estimated $1 trillion by 2040. That's a tantalizing number for many investors, but adding some exposure to the space industry isn't for the faint of heart.
Space stocks are still very volatile, and it could be many years before they, ahem, get off the ground. But if you're in the market for a few space stocks that could be good buys when the market dips, then check out what Lockheed Martin (LMT 1.23%), Northrop Grumman (NOC 2.84%), and the ARK Space Exploration & Innovation ETF (ARKX -0.42%) are doing right now.
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1. Lockheed Martin
Lockheed Martin is a leading defense contractor that has made some major moves in the space industry as well.
For one, the company develops hypersonic missiles for the U.S. government and successfully tested two of them over the summer. Lockheed Martin isn't the only hypersonic missile game in town, but the company is still a leading player in the segment at a time when the government is increasing its annual spending on hypersonic missile research to $4.7 billion, up from $3.8 billion last year.
And hypersonics aren't Lockheed's only space opportunity. The company also has an extensive satellite and launch business as well. And Lockheed is the prime contractor for NASA's new Orion spacecraft, with a contract to build six of the spacecraft already -- and potentially up to 12.
While not a pure space play, investors still get plenty of exposure to the space industry with Lockheed Martin, considering that about 17% of its total sales come from the sector.
2. Northrop Grumman
Northrop Grumman is also a leading player in the space industry, making space launch systems and rockets for customers in the government and commercial industries.
One thing that sets Northrop Grumman apart from some of its competitors is the fact that the space industry is the company's largest revenue segment. In the first nine months of 2022, Northrop Grumman's Space Systems segment revenue increased by 13% year over year, reaching nearly $9 billion.
The company's Space Systems segment accounted for 34% of total sales in the first nine months of 2022, and it's likely that space will remain an important revenue driver for the company. Northrop Grumman's CFO, Dave Keffer, said recently that "we continue to expect space to remain our fastest-growing business."
The company has a few new opportunities in its space pipeline, including securing a multi-year $2 billion contract to build rocket boosters to help launch more than 3,000 satellites for Amazon.
Northrop Grumman's management raised its guidance for its space segment for 2023 -- its only segment that received a guidance increase -- and now estimates that sales for Space Systems will reach $13 billion in 2022, up from $12 billion in 2022.
3. ARK Space Exploration & Innovation ETF
If you're looking for exposure to the space industry, but don't want to invest in just one company, then you may want to consider buying shares of Cathie Wood's ARK Space Exploration & Innovation ETF. This exchange-traded fund (ETF) has 10 stocks in total, with its largest positions in Trimble, Iridium Communications, and AeroVironment.
Trimble's technologies are in a variety of industries but have exposure to space through its global navigation satellite systems, which are used for space exploration. Iridium makes communication systems used by satellites, and AeroVironment makes unmanned aerial vehicles, including the Mars Ingenuity helicopter.
ARK Space Exploration & Innovation ETF launched in 2021, which wasn't exactly the best time for stocks in general. As many investors have become more skeptical of more risky investments, the ETF has felt the effects of that sentiment, and it has fallen 33% since its inception.
But for investors who are bullish on the space industry and want to spread out their investments among a mix of space stocks, Wood's ETF could be a good way to get the exposure they're looking for.
Lots of potential, but hold on tight
Investors need to know that while investing in the space industry has lots of long-term potential, it's likely going to be volatile for a while.
But for investors who are keeping a five-year timeline -- or longer -- these stocks could end up being a good way to ride the space industry as its opportunities skyrocket in the coming years.
