3 Space Stocks Set for Out-of-This-World Gains

Space stocks are among the most asked-about investments in my line of work. And it’s not hard to see why…

Elon Musk’s SpaceX tantalizes investors with its vision and profit potential — but it’s privately held. 

Other billionaires like Jeff Bezos and Richard Branson have set their sights on the stars, too. They’ve even gone as far as launching themselves into space, generating eye-grabbing headlines in the process. 

Then you have the more analytical-minded investment firms, which see a bright future for the so-called “space economy.”

Indeed, every Wall Street brokerage and research institute has its own staggering projection for an industry that encompasses manufacturers, launch companies, and every single company that relies on satellite data to run its business.

For example, the latest report I saw came from McKinsey, and it predicted the space economy would grow from $630 billion in 2023 to $1.8 trillion by 2035.

This puts the space economy on a growth trend consistent with that of semiconductors — estimated at $600 billion in 2021 with 6%–8% annual growth into the 2030s.

So if you believe in stocks like Nvidia, then you ought to be just as interested in space stocks, which are poised to grow at roughly the same rate.

Of course, that’s not to say every space stock will deliver Nvidia-like gains. Results will vary, of course. 

That’s why today we’re going to take a closer look at the space economy and identify the space stocks that are best positioned to come out ahead.

Space Stocks Launching Higher

As far as I’m concerned, there are two places to start for any investor who wants to get into space stocks…

Lockheed Martin (NYSE: LMT) and Northrop Grumman (NYSE: NOC).

These two companies are best known for being two of America’s top defense contractors. 

However, the defense industry and space segment are effectively entwined at this point. 

To begin with, the technology, materials, and knowledge necessary to building and launching spacecraft is almost identical to the technology, material, and expertise required to build advanced fighter jets and missile systems.

That is, a rocket is a rocket, whether it’s carrying a satellite into orbit or attempting to intercept an incoming ICBM. They also rely on the same network of government agencies, individuals with security clearances, and scientists.

And that’s why America’s defense giants have long had a place in the space industry.

Indeed, the government first contracted Lockheed Martin (The Martin Company at the time) to design and build its first Viking rocket all the way back in 1949. It carried out NASA’s first Viking missions to Mars in the 1970 and has participated in every mission to the planet since.

Similarly, Lockheed Propulsion Company designed and built the solid propellant launch escape motor and the pitch control motor for the Apollo spacecraft.

More recently, Lockheed Martin designed and built NASA’s Orion spacecraft, which is expected to carry the next man and first woman to the moon. Lockheed Martin is also building landers and rovers for the moon as we set about the task of building permanent structures on or around it.

In all, LMT’s Space segment generated $3.3 billion in sales in the first quarter, while its operating profit increased 16%, to $45 million.

This growth was underpinned by massive deals like the $17 billion contract to develop the Next Generation Interceptor — part of a modernized missile shield that will help guard against ICBMs and hypersonic glide vehicles that traverse low earth orbit.

And don’t forget, satellites are another huge growth opportunity, as the U.S. has ramped up its satellite launches by more than 10-fold over the past decade.

That’s because communication, intelligence gathering, and information sharing are essential to military operations. And the bulk of that work is now being handled by satellites. 

To that point, the Space Defense Agency awarded Lockheed Martin $890 million for sensor-equipped satellites to help identify and track missile threats.

All told, Lockheed Martin’s Space business walked away from the first quarter with a record $33 billion backlog that’s poised for growth.

Moving on, everything I just said can also be applied to Northrop Grumman, which has also seen its space business expand rapidly.

Just last month, I drew attention to a secret deal Northrop Grumman had struck with SpaceX. It’s reportedly testing and installing sensors on hundreds of spy satellites that SpaceX was contracted to build and deploy on behalf of the National Reconnaissance Office.

This is part of the Pentagon’s response to that effort is to blanket space with as many satellites as possible. That will increase the scale and quality of our intelligence gathering. It’ll also create durability and redundancy as our space assets have become prized targets for Russia and China. 

The total value of the deal SpaceX signed in 2021 was $1.8 billion. The first batch of these satellites was launched in May, with five more launches to come later this year. 

Northrop Grumman has also been contracted by DARPA to develop a lunar railway concept as part of the 10-year Lunar Architecture (LunA-10) Capability Study. (This is something I first mentioned on The Wealth Advisory’s Top 10 Stocks for April segment.)

This heady task means Northrop will have to…

• Identify the resources needed to build a railway on the moon.
• Outline the potential cost of such a project. 
• Evaluate technological and logistical risks. 
• Prototype and design its architecture. 
• Identify any issues with grading the rail line, building its foundations, and laying the track. 
• Putting in place a plan for long-term inspection, maintenance, and repair.
• And figure out how to build it with robots.

Deals like this helped drive a 9% increase in Northrop Grumman’s first-quarter Space segment revenue, which totaled $3.7 billion.

That even topped Lockheed Martin, making both viable space stocks. 

However, the biggest profit opportunity in the space economy is much, much smaller than those two titans. 

No doubt, Lockheed and Northrop will deliver solid gains and dividends, but this tiny rocket manufacturer could deliver massive returns as it grows into SpaceX’s biggest competitor.

You can get my full report on that gem right here.

Fight on,

Jason Simpkins

Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more…

In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page.

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