In this piece, we will take a look at the ten 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 Best Space Stocks to Buy According to Hedge Funds
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. 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’s Simcoe Capital Management is Maxar Technologies Inc.’s largest investor. It owns 2.7 million shares that are worth $72 million.
Maxar Technologies Inc. joins Lockheed Martin Corporation, The Boeing Company, and Amazon.com, Inc. 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.’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. developing a ground space infrastructure for national security.
Iridium Communications Inc.’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.’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. 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. 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.’s shares in their portfolio.
Warren Lichtenstein’s Steel Partners is Aerojet Rocketdyne Holdings, Inc.’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. 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. 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.’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 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 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’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 budget7 that 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, Lockheed Martin Corporation, and Amazon.com, Inc. are met by Northrop Grumman Corporation in our list of hot space stocks.
5. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 51
The Boeing Company is one of the largest aerospace companies in the world. It caters to the needs of the commercial and defense aviation sectors, alongside manufacturing spacecraft and other systems and subsystems for space exploration. The company is headquartered in Chicago, Illinois, the United States.
The Boeing Company is a central part of NASA’s Artemis program. The company has built the Space Launch System (SLS) rocket which will be the workhorse of the program. As if this weren’t enough, it has also helped manufacture two spacecraft for NASA – under the Commercial Crew Program (CCP) and Artemis.
The first of these is the Starliner spacecraft which will launch both crewed and cargo missions to the International Space Station (ISS). The second is Orion, which will be the only spacecraft that is capable of launching on the SLS with astronauts for the first leg of their journey to the Moon. 51 out of the 895 hedge funds polled by Insider Monkey during Q2 2022 had held a stake in The Boeing Company.
Out of these, Andreas Halvorsen’s Viking Global is The Boeing Company’s largest investor. It owns 1.3 million shares that are worth $190 million.
Meridian Funds mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“We similarly remained invested in largely out-of-favor The Boeing Company (NYSE:BA), a global leader in developing and producing commercial jet aircraft. Due to some self-inflicted wounds and a bit of bad luck, as well as dramatic declines in air travel early in the pandemic, investor sentiment for this company has simply been awful. As part of our contrarian thinking, however, we view the business as critical to global transportation needs and see multiple catalysts to improve sentiment. In addition to the current surge in air travel worldwide, ramped up production of the 737 MAX aircraft and the pending restart of 787 Dreamliner deliveries should help turn broader sentiment. Additionally, we anticipate a meaningful inflection in cash flow as Boeing starts delivering aircraft currently in storage as well as the eventual expansion of its production in both core platforms.”
4. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 55
Lockheed Martin Corporation is an American defense and aerospace company. It is one of the oldest space companies in the world and has its roots in the X-17 program of the 1950s which aimed to test rocket reentry and propulsion.
Lockheed Martin Corporation’s space division sees the firm manufacture a host of different spacecraft, satellites, and missile systems. The firm built the external tank for NASA’s space shuttle, the Hubble telescope, and four Mars landers and reconnaissance satellites.
Lockheed Martin Corporation is also the primary manufacturer of NASA’s Orion spacecraft, and the firm is also responsible for manufacturing the latest versions of the Global Positioning Satellites (GPS) for the United States Military. As this year’s second quarter ended, 55 out of the 895 hedge funds polled by Insider Monkey had held a stake in the company.
Lockheed Martin Corporation’s largest investor is Rajiv Jain’s GQG Partners which owns two million shares that are worth $877 million.
Vitava Fund mentioned the company in its Q3 2022 investor letter. Here is what the fund said:
“LMT is one of the world’s largest aerospace and defence companies. The war in Ukraine has reminded investors and the wider public just how important these companies are. The aerospace and defence industry in the USA is an established oligopoly. This means that a few large firms play a dominant role. While collectively they comprise an oligopoly, individually they often have monopoly positions in particular narrower segments. Their main counterparty is the US government, a key customer in what is known as a monopsonist position. This is a rather unusual situation, but one that is very advantageous for companies such as LMT.
3. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
QUALCOMM Incorporated (NASDAQ:QCOM) is an American company that is responsible for manufacturing the bulk of smartphone processors, graphics processing units (GPUs), and modems used in Android devices. The company is headquartered in San Diego, California.
While QUALCOMM Incorporated is primarily associated with consumer technology, the firm has also played a crucial role in the astronautics sector. The company’s Qualcomm Flight Platform, originally designed for consumer robotics, helped NASA’s Ingenuity helicopter make the first powered flight on Mars last year, using altitude and accelerometer sensor data to calibrate the helicopter to Mars’ complicated atmospheric pressure and gravity.
QUALCOMM Incorporated’s software is also used by NASA’s Perseverance rover, which lets it process the images that are received from the helicopter. Insider Monkey’s June quarter of 2022 survey of 895 hedge funds revealed that 71 had held a stake in QUALCOMM Incorporated.
QUALCOMM Incorporated’s largest investor is Panayotis Takis Sparaggis’s Alkeon Capital Management which owns 4.2 million shares that are worth $541 million.
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) is an American semiconductor designer and seller that is responsible for selling products that are used in a wide variety of applications such as product design, video gaming, personal computing, and cloud computing. The firm is headquartered in Santa Clara, California.
NVIDIA Corporation plays a key role in both aerospace manufacturing and planning, as its graphics processing units (GPUs) are among the most powerful in the world. A whopping 3,312 NVIDIA V100 Tensor Core GPUs are used by NASA to run countless simulations for retro-propulsive crewed Mars landers. These simulations study the effects of firing the lander’s engine in the opposite direction to slow down its speed as it lands.
As if 3,312 GPUs weren’t enough, the Department of Energy’s Summit Supercomputer which uses a whopping 27,000 A100s is simulating the mixing of propellant and oxidizer in a rocket engine to improve combustion efficiency. By the end of this year’s second quarter, 84 out of the 895 hedge funds polled by Insider Monkey had owned NVIDIA Corporation’s shares.
NVIDIA Corporation’s largest investor in our database is Ken Fisher’s Fisher Asset Management which owns 7.5 million shares that are worth $1 billion.
Baron Funds mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them were large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…” (Click here to see the full text)
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
Amazon.com, Inc. is the world’s largest electronic commerce retailer, which has also spread its presence into a variety of other industries over the years. These include consumer electronics, cloud computing, and more important, satellite internet.
Amazon.com, Inc. is designing the Kuiper satellite internet constellation, which like SpaceX’s Starlink, will also use low Earth orbit satellites to beam down the Internet all over the globe. The satellite constellation consists of more than three thousand satellites, and Amazon has secured 92 launches with three different providers to launch its constellation.
The first of Amazon.com, Inc.’s Kuiper satellites are slated to be launched next year, and the company also builds the user terminals or dishes for its internet service to be used by the end consumer for internet connectivity. As part of their Q2 2022 holdings, 252 out of the 895 hedge funds polled by Insider Monkey had invested in the company.
Out of these, Ken Fisher’s Fisher Asset Management is Amazon.com, Inc.’s largest investor. It owns 48 million shares that are worth $5.1 billion.
Lakehouse Capital mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) proved resilient in the face of ongoing macro pressures and delivered a strong quarterly result along with “better-than-feared” guidance for the third quarter. Net sales increased 7% year-on-year (10% constant currency) to $121.2 billion, while operating profit declined 57% to $3.3 billion. The drop in operating profit was attributable not only to external macro factors, such as elevated shipping and fuel costs, but also lower productivity and efficiency costs as a result of some overcapacity on the back of its recent investment cycle. It was pleasing to see that the company has begun to make progress on the more controllable costs, particularly productivity and staffing, with headcount, for example, down almost 100,000 over the quarter. We continue to believe Amazon is well positioned to manage these short-term issues and remains on track to deliver significant profit improvements over the next twelve months.
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This article is originally published at Insider Monkey.
