A decade ago, most investors would have laughed in your face if you told them to be bullish on the commercial space industry. In fact, many still scoff at the idea today.
Yet despite all this naysaying, space-related stocks are absolutely crushing it as of late.
You may already be aware of the recent run by Orbital Sciences (NYSE: ORB) in 2013. After a chain of successful launches and the first ever resupply to the ISS by a public company, Orbital snagged headline after headline as shares jumped 72% in 12 months.
Now, those gains are impressive — as was the 35% growth in global launch revenue last year — but there are still better opportunities in this market.
In 2013, I featured five little-known stocks set to benefit from the burgeoning space industry. The information didn’t garner too much attention at the time, but it’s worth noting that these players are all sitting in the green right now.
Astrotech (NASDAQ: ASTC) certainly stands out the most, with a 162% gain in the last three months and a crucial addition to its patent portfolio. If you’ve profited from this play, then congratulations — it’s always great to see our readers making those kinds of gains.
At this point, a trailing stop is certainly in order, but otherwise I have little to add about ASTC today. Instead, I want to touch on what is quite possibly the biggest threat to the commercial space industry and exactly what’s being done to stop it.
Kessler Syndrome
If you had the chance to watch Gravity in theaters last year, you’ve already been introduced to the concept of the Kessler Syndrome… or at least Hollywood’s depiction of it.
Somewhere out in Earth’s orbit, a Russian test missile collides with a defunct satellite. The explosion churns out a storm of deadly orbital debris, with George Clooney and Sandra Bullock stuck right in its path. Within 90 minutes, the cloud of debris snowballs in size as it wreaks total havoc on the Hubble Telescope, the ISS, and eventually China’s Tiangong-1.
It’s all incredibly exciting, but the events that occur are certainly a far cry from the reality of space. In truth, the Kessler Syndrome is a gradual occurrence, with orbital debris building up over the course of many decades. Additionally, the Hubble, ISS, and Tiangong-1 are all at drastically different altitudes and orbits, meaning a chain reaction would never occur as it did in the movie.
Of course that isn’t to say orbital debris will never be a problem. In fact, there have already been a small number of events in space involving substantial collisions.
In 1996, a French satellite was damaged by debris from a rocket that had exploded in orbit a decade earlier.
In 2007, a Chinese missile test destroyed an old weather satellite, resulting in over 3,000 additional pieces of debris.
Then, in 2009, an inoperable Russian satellite collided with a commercial U.S. satellite, adding more than 2,000 pieces of debris.
Orbiting earth at this moment are over 500,000 pieces of traceable debris — pieces of space junk from retired satellites, abandoned launch stations, and nonfunctional spacecraft. Most of this debris is incredibly small, but with velocities up to 17,500 mph, even a marble can be incredibly hazardous…
According to last month’s U.S. Congressional Research Service, objects as small as 1 cm could potentially disable a spacecraft, while 10 cm objects are large enough to cause “catastrophic damage.”
Reports from NASA even show that small chips of paint have damaged windows on the ISS when traveling at high enough speeds.
Despite the terrifying image above, the chance of detrimental asset collisions is fortunately rather low — about one every four years for larger objects. Collisions with smaller debris are over 500 times more common but have so far been just a minor nuisance to satellite operators.
By and large, this record can be attributed to the diligence in debris tracking by agencies such as NASA and the ESA. By keeping track of space junk, operational units such as spacecraft and commercial satellites have been kept out of harm’s way.
Unfortunately, the maneuvers required to avoid such collisions can be highly expensive and will become increasingly common as space debris continues to pollute Earth’s low orbit.
In 2014, we’re looking at record levels of earth-to-orbit launches since the Cold War. Overall, it’s great news for the space industry, but eventually we’ll need to pick up after ourselves.
Space Janitors
Fortunately, there has been a growing international interest in clearing space debris and a slew of methods being developed to clean up our skies.
One approach proposed by Boeing (NYSE: BA) involves a self-disintegrating rocket that would fire up to 10 tonnes of gas down on orbital debris. This would alter the trajectory of orbiting objects just enough for them to reenter Earth’s gravitational field and burn up in the atmosphere.
EADS Astrium takes a different angle and hopes to redirect space junk by using a small solar sail on satellites that act as an “orbital break.” So far, there has been limited success with solar sails in space, but the technology is gaining some traction. NASA will launch the world’s largest solar sail in late 2014.
The Swiss space center may win the award for most exciting approach with its CleanSpace One robotic satellite. The CleanSpace One is about the size of a shoebox and uses four tentacles to grab objects. Once it has a solid grip, the satellite performs a kamikaze mission, dragging its payload down into the atmosphere.
The most recent of these approaches comes from Japanese space agency JAXA and fishing equipment company Nitto Seimo Co. (TYO: 3524). The two firms are collaborating to build a 700-meter-long net made of magnetically charged wires.
The net’s magnetic field will attract debris and is attached to an unmanned spacecraft. When the net collects enough debris, it will forgo a suicide mission similar to the CleanSpace One. JAXA plans to launch the net next month and test its viability.
If any of these approaches are successful, it will certainly be a win for the commercial space industry. If not, don’t be too concerned — we still have at least another decade before orbital debris becomes a major concern.
Nevertheless, we’ll be keeping an eye on these developments, as successful pilot programs could mean huge contracts for companies like Nitto Seimo.
Turning progress to profits,
Jason Stutman
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