As emerging tech explodes onto the scene and interest in space exploration continues, investors are wondering where they can gain the best exposure to the space economy.
ProcureAM Co-Founder and CEO Andrew Chanin joins Yahoo Finance to discuss Procure's Space ETF (UFO) and why investors should consider adding it as interest in space exploration gains momentum.
"What the index looks at is for primarily... companies that are deriving a majority of their revenues from space-related activities, businesses, and services... roughly 80% of the fund looks at these more pure play space companies, but also recognizing that some of the biggest players in the space industry are your prime contractors, your diversified aerospace and defense companies," Chanin explains. "But maybe not... 50% or more of the revenues coming from that area, but the index looks for those diversified companies that are still making over 20% of the revenues from space, hundreds of millions a year in revenues from space."
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
AKIKO FUJITA: Well SpaceX postponing the launch of Intuitive Machines lunar lander today. Intuitive is vying to become the first commercial lander to make it to the moon and will hopefully take flight tomorrow. For how investors can cash in to the space market, let's bring in Andrew Chanin, Co-Founder and CEO of ProcureAM, here for our ETF report brought to you by Invesco QQQ.
It's good to talk to you today. And of course, you've got an ETF around the space space-- UFO. I'm looking through your holdings right now, though, as we see the ETF overall off to a bit of a rough start here. How do you think investors should consider where the space opportunities are right now, given that a lot of these companies are still privately held?
ANDREW CHANIN: Yeah. This fund was launched back in April of 2019. So we've seen companies added to the index. We've seen companies removed. We've seen mergers amongst companies in the index, as well as acquisitions of companies being taken private by private equity.
And so we have seen a lot of changes over these almost five years of the fund's existence. And the fund does rebalance, and reconstitutes, and it looks for these new opportunities. But right now, so much of the growth of the overall space economy over the last several decades has really come from communications companies.
And so that is a really important part of space that connects us here on Earth today. This interview wouldn't be happening if it wasn't because of space technology and satellite connectivity. And it helps us in so many ways today. But I think a lot of people are looking towards where the next areas of growth can be for space. And a lot of people are looking at still communications as well as this emerging cislunar economy, where this Intuitive Machines launch is something that we're looking to be able to expand as far as what's capable with the moon.
AKIKO FUJITA: So let's talk a bit more about that, Andrew. I mean, you're talking about satellite companies-- that's kind of where the big drivers have been in terms of where space exploration has been going. You've also got a name like Rocket Lab that's actually building out the rockets themselves that are heading to space. How do you think investors differentiate the two? And is the idea here to diversify your portfolio a bit to look at the beneficiaries as well as those who are helping those companies get them there?
ANDREW CHANIN: Yes. So you do have some of the picks and shovels. You have hardware. You have software. You have enablers. You know, what the index looks at is for primarily, it looks for companies that are deriving a majority of their revenues from space-related activities, businesses, and services.
So what you're looking at is your roughly 80% of the fund looks at these more pure play space companies, but also recognizing that some of the biggest players in the space industry are your prime contractors, your diversified aerospace and defense companies-- maybe 50% or more of their revenue's coming from that area, but the index looks for those diversified companies that are still making over 20% of their revenues from space, hundreds of millions a year in revenues from space. So there is kind of a balanced approach to investing in space, but with really a heavy focus on those that are more pure play.
AKIKO FUJITA: Andrew, what about some of those more traditional aerospace players, like a Lockheed Martin as well as Northrop Grumman? Where do you put that in your investment outlook when you think about the growth opportunities in the space industry?
ANDREW CHANIN: Yes. So up to 20% of the index at rebalance can be in these more diversified names. We have names like Lockheed, and Raytheon, and Boeing, and Airbus. And they are already major players in the space. Many people aren't that familiar that there's a joint venture between Lockheed and Boeing called the United Launch Alliance, which also helps participate in launch.
And we certainly hope to see more companies come public in the space industry. But a lot of times, these prime players, these diversified players are beneficiaries of being able to pick up other space-related technologies. And we certainly hope to see that as time progresses, that they'll have a bigger footprint as far as a percentage of their overall revenues coming from space. And kind of looking at how governments, militaries around the world are looking at space, it's pretty much consensus that space is viewed as the new strategic high ground for military and warfare. So being on the defense side of the spectrum means that space is something that they have to have some type of exposure to as those companies evolve themselves.
AKIKO FUJITA: Finally, Andrew, there's so much attention being placed on getting to the moon. We have seen Astrobotic not necessarily successful with their commercial lunar lander. We're talking about Intuitive now-- there's many other launches scheduled this year for lunar landers, specifically. Who stands to benefit the most on the back of a successful landing there? And as an investor, how can you position yourself for that?
ANDREW CHANIN: Well, certainly, hopefully, humanity benefits from successful lunar landings as far as what we can accomplish as a species. But certainly, launch companies that are helping send these crafts to the moon, the companies that are developing hardware and software that's utilized on these missions-- so much of this early stage, even a specific Intuitive mission, they're looking to pave the ground for future lunar landings-- so providing analytics of how moondust looks like when a lander actually approaches one of these craters, being able to put down beacons so that we can have better navigation and communications capabilities on the moon.
So we're actually hoping to lay down some of this infrastructure that will benefit future lunar missions as well. So certainly, these companies hope to be successful and see all their experiments work. But this would be a tremendous milestone for a commercial lunar landing.
It's been since the '70s that the US has sent a lunar landing successful mission-- and very few countries have been successful in a soft landing on the moon, period. So for a commercial company from the US to be able to achieve that I think is something that people around the world will be watching.
AKIKO FUJITA: Andrew Chanin, Co-Founder and CEO of ProcureAM, good to talk to you today. I appreciate the time.
ANDREW CHANIN: Thank you.
