After a strong week of gains for markets stock fell heavily
on Friday to make sure that the Nasdaq closed down for the week and that the
Dow and S&P 500 erase most of the gains they made. Yet Friday’s 160 point
loss should have been expected, in fact I was prepping for it since Wednesday,
and I am sure that the selloff provides nothing but opportunity. With that said Corporate earnings will be in
focus this week and unfortunately they are expected to be poor.
Off
course I am not willing to analyze the already over analyzed market, what I am
going to do is shed some light on a new industry that is behind the future of
space travel, the rocket industry.
Ok,
that makes it sound like corporations are building ICBM’s (to confirm the fears
of conspiracy theorists) but in the last few years as Congress begins to cut
down ,at least a little, on its spending the National Aeronautic Space Administration
(NASA) has been receiving cuts in funding. Basically this means no body will be
going to the moon any time soon and NASA will not be building rockets to send
various satellites into space.
For all
those young kids who want to become astronauts do not despair, instead of
paying billions to build and launch rockets and satellites into space NASA has
instead opted to spend only hundreds of millions on hiring private companies to
execute the launches themselves. This creates a whole new industry that has yet
to be completely realized.
With that said, however, I do think
that this industry will be receiving a lot more scrutiny by Wall Street in the
next few months. Especially after an article published by the Wall Street
Journal titled SpaceX to Compete With
Boeing-Lockheed Venture or Satellite Launch. This article written by Doug Cameron raises
new hopes and new life for the Space industry.
I say that because the Pentagon has
recently announced its intention to start accepting bids from U.S companies to
develop a cheaper American made rocket to replace the, ironically, Russian made
rocket currently employed by the United Launch Alliance (ULA) that has until
now held a virtual monopoly of the space launch industry.
The ULA is a 50-50 partnership
between Lockheed-Martin and Boeing, the company until recently controlled the
majority of the contracts from NASA, the Department of Defense and the Air
force. The companies Delta and Atlas rockets have been the mainstays of the
space industry for the last 50 years, there relatively cheap launches and
disposability led them to replace the space shuttle and the rockets can
probably be described as the AK-47’s of rockets, there is just one problem,
they are built around Russian made engines.
Yes you heard me, in essence the
Russians make our rockets, it’s disgraceful I know. With the recent tension
with Russia over Ukraine apparently the Pentagon feels we need our own rocket, it’s
about time too!
In a strange way by taking over the
small Ukrainian Peninsula that until a few months ago few heard of or gave a
damn about, otherwise known as Crimea, Russian President/Tsar Vladimir Putin
has helped launch a new Space Race.
But this Space Race will not be a
repeat of the Cold War, this time the competition to go to space will not be
between the U.S and the Soviet Union competing over who gets there respected
place in history. Instead the competition will be between American corporation competing
for something considerably more valuable…..government contracts, the very
things that can make or break companies.
It’s time to meet the players in this new race to the heavens-
The
company that arguably receives the greatest opportunity in the Pentagon’s call
for a new rocket is unfortunately a private one. Space Explorations
Technologies better known as SpaceX has decided that it wants to be the company
to lead the U.S into space.
SpaceX
is another one of entrepreneur Elon Musk’s futuristic like companies focused on
building the future. And although still privately held SpaceX already had
several successful launches of its own and currently hold almost $5 billion in
government contracts. Besides already having credibility launching small and
medium payloads into space SpaceX claims to bring to the table a cheaper launch
vehicle that according to Elon Musk can send large payloads into space for a
third of the cost ULA is doing it for, just $100 million compared to $300-330
million.
Clearly
the United Launch Alliance is facing a problem, the joint venture between two
of the biggest government contractors, Lockheed-Martin and Boeing is under siege
by Elon Musk’s SpaceX. SpaceX has already sent an army of lobbyists to
Washington hoping to open up 34 ULA launch contracts to bidding (although this
is unlikely to happen since the government officials have stated that opening
these contracts to open bidding would result in higher expenditures and cost
overruns) .
Even
so, ULA faces a severe problem, its Russian made RD-180 engines that are so
critical to power there Evolved Expendable Launch Vehicle (EELV) that power the
Lockheed made Atlas V and the Boeing mad Delta IV, are in short supply and
there are few spares. Officials from both companies have tried to reassure the
Pentagon that there are enough engines left for 2 ½ years, but a government
report is due at the end of the month to determine if this is true.
As for
the Space race SpaceX has been trying to open all 14 launches planned for the
next two years to bidding. Unfortunately for SpaceX this number this number
might be dropped to 7-8 launches because of current satellites staying in
operation longer. In any case the lobbying war between SpaceX and ULA will
probably continue for the foreseeable future with the space race heating up
over that time period.
As for
investors hoping to come along for the ride, it is highly unfortunate that
SpaceX is not yet public although rumors of a potential IPO have been swirling
around for years. But shares of both Boeing and Lockheed-Martin, the owners of
ULA are publically traded. Also worth looking at if you are interested in
investing in the space race are shares of Orbital Sciences (ORB).
Orbital
Sciences is the only pure play space company out there, and its Cygnus space
capsule which was first shot into orbit in June 2013 is unmanned and has the ability
to carry 20,000 kilograms of supplies. So far Orbital Sciences appears to be in
the perfect position to become the leader in supplying the International Space
Station. The down side to the stock is that the company does not have a manned
capsule under development which is the one thing that will woo investors and
send the stock through the roof. With that said however Orbital Sciences is a
good stock to invest in if you are willing to invest into the new Space Race.
Another
company that might be a player in the new race to space is Alliant (ATK) this
company is developing its Liberty Space Capsule due to launch in 2014. The
company has had a history with NASA, it developed the Rocket boosters for the
Space Shuttles. Unfortunately the company does not hold contract to develop the
Liberty Capsule yet which means if the contract is not awarded to Alliant the
stock might be a victim to a strong sell-off.
In any
case whether you are investing in Lockheed, Boeing, Orbital Sciences, Alliant
or anticipating the IPO of SpaceX the truth is a new space race is starting and
the victor will not only become rich but control the future of the space
industry.
IN THE NEXT FEW MONTHS I WILL BE MAKING A WEBSITE FOR INVESTMENT WEEKLY WHICH WILL INCLUDE WEEKLY STOCK TIPS AND POTENTIAL OPPURTUNITIES IN THE MARKET AS WELL AS WEEKLY ARTICLES ABOUT MARKET EVENTS AND ANALYSIS OF VARIOUS INDUSTRIES
IF YOU HAVE IDEAS FOR THE NEW WEBSITE PLEASE COMMENT
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THANK YOU
That blog was beautiful
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