This is an extract from Paul Hill’s
Precision Guided Investments newsletter
. Paul is an expert analyst for Fleet Street Publications and MoneyWeek magazine, specialising in companies in new, fast-growing sectors. Precision Guided Investments is his weekly newsletter in which he shares his in-depth analysis of the most exciting companies in the market.
Here’s why the space industry is great – the stratosphere is the ultimate barrier to entry. Getting to space takes decades of engineering, billions of dollars and strong client relationships. The sector is out of bounds to all but a handful of the most advanced aerospace players. Private rocket builders have put in years of R&D and tough rocket science, and now they’re reaping the rewards. They’ve won the trust of NASA and the US Department of Defense and have launched hundreds of satellites for private customers.
And they’re going to be needed. The Obama administration has decided that the economics of space exploration is broken, not the science. Their plan: get out of the low earth orbit business by retiring the space shuttle programme, and rely on private industry to build the technology to ferry people and cargo into space.
That leaves NASA free to focus on the frontier, developing advanced technology for the most ambitious space flights. And it’s an opportunity for daring high tech rocket companies to fill the space shuttle’s shoes.
Fighting for a piece of a $289bn industry
It’s already a massive industry. The Space Foundation estimates that the space economy grew by 12.2% last year, to $289bn. And that number is up 41% since 2007, driven mainly by commercial companies and a 22% jump in private space infrastructure last year.
Private space companies are looking to build safe, reliable rockets to transport people and cargo at a fraction of their previous cost. Companies such as Orbital Sciences are targeting a $20m cost per astronaut on their next generation of manned rockets – compared to the $50m paid currently to the Russian government for a trip with their Soyuz rockets.
So far the private rocketeers have won multi-billion dollar contracts from NASA to ferry cargo to space. And manned space flight is their next goal.
Private rockets are also profiting from a global satellite boom. The insatiable appetite for data is fuelling demand for new satellites so that now they crowd the sky. The satellite launch industry’s revenues bear this out – they grew by 10% last year. Satellite manufacturing revenues also grew by 9%. And the market for geostationary satellites – which hang in a high stationary orbit above the equator – is set to grow by 10-20% this year.
Forecast international doesn’t see things changing any time soon – it values the commercial satellite market at $52.7bn in the next ten years. Such a tempting market has attracted all sorts of space industry players, from niche start-ups such as Virgin Galactic to Boeing, SpaceX and Orbital Sciences.
• This article is taken from the free investment email The Right side. Sign up to The Right Side here.
Important Information
Your capital is at risk when you invest in shares – you can lose some or all of your money, so never risk more than you can afford to lose. Always seek personal advice if you are unsure about the suitability of any investment. Past performance and forecasts are not reliable indicators of future results. Commissions, fees and other charges can reduce returns from investments. Profits from share dealing are a form of income and subject to taxation. Tax treatment depends on individual circumstances and may be subject to change in the future. Please note that there will be no follow up to recommendations in The Right Side.
Managing Editor: Frank Hemsley. The Right Side is an unregulated product published by Fleet Street Publications Ltd.
Fleet Street Publications Ltd is authorised and regulated by the Financial Services Authority. FSA No 115234. https://www.fsa.gov.uk/register/home.do