Wall Street’s UFO sighting: More to space stocks than Virgin Galactic

Richard Branson’s Virgin Galactic has been on a tear this year. The stock is up 200% so far in 2020 and even rallied Monday as the Dow plummeted more than 1,000 points. Apparently in space, nobody can hear you scream coronavirus (or bubble).

Virgin Galactic reported its latest quarterly results after the closing bell Tuesday — its first earnings report since the company went public last year through a merger with a so-called special purpose acquisition company, or SPAC. The company posted a loss of $72.8 million for the fourth quarter and $210.9 million for all of 2019.

Investors who want exposure to the nascent space and satellites industry might be wary of placing a big bet solely on Virgin Galactic given how much the stock has already rallied. And while Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin aren’t public, there is a way for investors to get exposure to the broader space industry — including Virgin Galactic.

There’s now an ETF with the ticker symbol — wait for it — UFO that owns shares of companies that include Virgin Galactic, satellite radio and TV companies Dish and Sirius XM as well as Intelsat, a communications company that recently spiked on reports that Verizon might want to invest in it or even buy it.

“Space is an industry that I’ve been fascinated by for a long time, but it’s only now that we have enough stocks for a diversified index,” said Andrew Chanin, co-founder and CEO of Procure Funds, the company that manages the Procure Space ETF.

Chanin said that the ETF is based off the The S-Network Space Index, created by a firm called Space Investment Services. The index’s managers look for companies that can benefit from the increased use of satellites for communication.

To that end, Chanin said Intelsat is a top holding that could benefit from the launch of 5G wireless services around the globe. He noted that in addition to the Verizon rumors, the stock recently got a bump from the news that influential hedge fund manager David Tepper bought a more than 7% stake for his own Appaloosa fund.

Chanin said that investors looking at the space sector need to keep satellite companies like Intelsat, Dish and Sirius XM in mind and not just bet on space tourism. The fund also owns large stakes in Maxar, a satellite and space robotics company, as well as Garmin, the navigation powerhouse that relies on satellites for its GPS mapping technology.

“It’s important to have many different players involved in space, including those who already have commercial businesses,” Chanin said. “There aren’t any other pure play space tourism companies on Wall Street yet besides Virgin Galactic.”

So unless SpaceX or Blue Origin go public, Chanin said Virgin Galactic will remain like the Beyond Meat of space tourism — the only major public company in a red hot industry.

The UFO ETF also owns defense contractors with exposure to NASA and other worldwide government agencies exploring space. Lockheed Martin and Boeing, for example, are major holdings. And Chanin thinks that the launch of President Trump’s Space Force could lead to a big jump in spending on space exploration from other countries around the world.

But investors considering the UFO ETF should be aware that because it is so diversified, it isn’t benefiting as much from Virgin Galactic’s meteoric rise as they might hope. The fund is up a respectable 3% this year and has gained more than 10% in the past three months.

Still, the ETF is up only 6% since its launch last April, trailing the S&P’s 10% gain over that same time frame.