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The ARKX analysis below will help you decide if this ARK ETF is a buy or not.
ARKX Background: The Case to Invest in Space
There are very few pure-play space companies because of the costs and difficulties in turning a profit.
However, many consider space the next frontier, including the U.S. government, which added the United States Space Force to its uniformed services in 2019.
Morgan Stanley estimates “the global space industry could generate revenue of more than $1 trillion in 2040, up from $350 billion currently.”
Here are a few reasons companies and governments are interested in the space economy:
#1. Satellite Internet
Companies like SpaceX and Iridium (IRDM) are focused on improving connectivity through low-Earth orbit satellites, wireless broadband, and optical technologies. This is probably the most profitable space-related sector in the short term.
- ARKX Satellite Internet companies: Iridium, Kratos, & L3Harris
#2. Earth Observation
Earth observation companies develop GPS, imaging, tracking, and analytics technology to monitor the weather, climate, maritime data, and more.
- ARKX Earth Observation companies: Garmin, Teledyne, Dassault Systemes, Raven Industries, & John Deere
#3. Space Infrastructure
Space infrastructure companies build the infrastructure for life in space by designing and developing spacecraft, hardware, and engines.
- ARKX Space Infrastructure companies: The 3D Printing ETF, Spirit Aerosystems, Komatsu, & Heico
#4. Deep Space Exploration
Deep space exploration companies develop missions to transport people and cargo beyond Earth’s atmosphere to places like the moon and Mars.
- ARKX Deep Space Exploration companies: Boeing, Airbus, Lockheed Martin, and AeroVironment
#5. Space Tourism
Space tourism companies provide access to space for private citizens and space adventure programs.
The billionaire space race is underway – Richard Branson recently went to space in his Virgin Galactic rocket and Jeff Bezos plans to do the same with Blue Origin.
However, ARK recently removed Virgin Galactic from its fund.
- ARKX Space Tourism companies: Pure-Plays N/A (eventually SpaceX and Blue Origin)
While these are all exciting trends, Morgan Stanley classifies satellite internet access as the most significant short- and medium-term opportunity for space-related companies.
>> More: Motley Fool Review
Why Invest in ARKX?
According to ARK, this fund aims for thematic exposure to “Space Exploration”, which includes orbital and sub-orbital aerospace, enabling technologies, and beneficiaries of aerospace activities, such as agriculture, Internet access, global positioning systems (GPS), construction, and imaging.
Here is how ARK defines these categories and the fund’s current allocation to them:
- Orbital Aerospace Companies launch, make, service, or operate platforms in the “orbital space”, including satellites and launch vehicles (16%)
- Suborbital Aerospace Companies launch, make, service, or operate platforms in the “suborbital space” but do not reach a velocity needed to remain in orbit around a planet (8%)
- Enabling Technologies Companies to develop tech for aerospace operations including artificial intelligence, robotics, 3D printing, materials and energy storage (32%)
- Aerospace Beneficiary Companies stand to benefit from aerospace activities including agriculture, internet access, global positioning system (GPS), construction, imaging, drones, air taxis and electronic aviation vehicles (43%)
Making Sense of ARKX
ARKX is not a pure-play space investment today; most of these names have space-related divisions representing a small portion of their overall operations.
ARK appears to be buying companies that can become “space companies” as their technology improves and costs come down.
ARK has a reputation of making risky investments, but many of the constituents in ARKX are well-known quality companies:
As you can see, ARKX includes many of the best FAAMG stocks. These companies might be serving as stable investments until more pure-play space opportunities hit the market.
Cathie Wood underscores the value of a long-term mindset regarding innovation and disruptive technology – but the inevitably of the space economy doesn’t mean that ARKX is a buy.
ARKX ETF Details
- Ticker: ARKX
- Type: Active Equity ETF
- Inception Date: March 30, 2021
- Expense Ratio: 0.75%
- Fund AUM: $468 million
- Typical Number of Holdings: 40-55
- Weighted Avg. Market Cap: $118 Billion
- Median Market Cap: $22 Billion
- Active Share (S&P500): 93%
ARKX Top Holdings
#1. Trimble Inc. (TRMB) 8.54%
Founded in 1978, Trimble uses technologies in positioning, modeling, connectivity, and data analytics to deliver products and services that connect the physical and digital world. Trimble mostly works with agriculture, construction, geospatial, and transportation companies.
Trimble’s primary focus is commercial and industrial building, but its geospatial division must have caught ARK’s attention – approximately 20% of revenues come from surveying and GPS products.
#2. Kratos Defense & Security (KTOS) 8.32%
Kratos develops and fields systems, platforms, and products for national security and communication needs, such as unmanned systems, satellite communications, C5ISR, warfighter training, and combat systems.
Kratos contracts with the U.S. military, government, and commercial sector – it was included in ARKX for its satellite, UAV, antenna, and network expertise.
#3. ARK’s 3D Printing ETF (PRNT) 6.91%
The 3D Printing ETF tracks an index of companies involved in 3D printing hardware, computer-aided design (“CAD”) and 3D printing simulation software, 3D printing centers, scanning and measurement, and 3D printing materials.
ARK received criticism for repackaging one of its own funds in ARKX, but the company believes 3D printing’s role in manufacturing parts is crucial to space exploration, and PRNT is (objectively) the best exposure option.
#4. L3Harris Technologies (LHX) 6.75%
L3Harris is a global aerospace and defense technology company that specializes in surveillance solutions, microwave weaponry, and electronic warfare.
The company is organized under four business segments: Integrated Mission Systems, Space & Airborne Systems, Communication Systems, and Aviation Systems.
Its space segment focuses on payloads, sensors and full-mission solutions for intelligence, surveillance and reconnaissance (ISR), missile defense, positioning, navigation and timing (PNT), weather, and ground-based space surveillance networks.
#5. AeroVironment (AVAV) 6.58%
AeroVironment is primarily involved in the manufacturing of Unmanned Aircraft Systems (UAS) and tactical missile systems used for surveillance and reconnaissance.
The company sells a suite of small UAS and medium UAS solutions, in addition to tactical missile systems, network connectivity solutions, and a handful of commercial solutions, such as mapping drones for in-field assessment.
AeroVironment works closely with NATO, who appears to be the company’s biggest customer.
#6. Iridium Communications (LHX) 5.42%
Iridium is a global satellite communications company that strives to provide access to voice and data services anywhere on Earth.
The company has a constellation of satellites that connect people to their devices regardless of their location.
A variety of industries rely on Iridium’s tech for connectivity: aviation, autonomous systems, maritime shipping, remote construction teams, rescue teams, and more.
Iridium also sells products to the backcountry skier or explorer. The company has a large and expanding total addressable market.
Unexpected Holdings IN ARKX
ARKX owns some names that aren’t typically associated with space exploration, such as Google, Amazon, and the previously mentioned JD.com.
ARKX also owns John Deere (DE), the heavy equipment maker that manufactures tractors. Wait, what?
While nobody expects to see a tractor in space, Deere actually uses space technology like GPS, space-based earth imaging, and drone applications to improve farming capabilities.
Remember, products or services that occur “beyond the surface of the Earth”, like drones, satisfy ARKX’s inclusion criteria.
Adding SpaceX and Blue Origin to ARKX
There are several private space exploration companies that are looking to go public over the next few years, most notably Elon Musk’s SpaceX and Jeff Bezos’s Blue Origin.
Without a doubt, these two companies will be major additions to ARKX once they IPO. They are each driving down the cost of spaceflight via reusable launch vehicles.
>> See: Tesla Stock Forecast
ARKX: Frequently Asked Questions
Which ARK ETF is best?
ARK’s flagship ETF is the “ARK Disruptive Innovation (ARKK) ETF”, which invests in companies focused on artificial intelligence, autonomous vehicles, fintech, DNA sequencing, robotics, and 3D printing.
Is there a space ETF?
There are a handful of space-related ETFs, most notably SPDR S&P Kensho Final Frontiers ETF (ROKT), Procure Space ETF (UFO), and the ARK Space Exploration & Innovation ETF (ARKX). There are only a handful of pure-play space companies, and many of them are still private.
What stocks are in ARKX?
These are the top 10 stocks in ARKX by allocation:
- Trimble Inc (TRMB) 8.54%
- Kratos Defense & Security Solutions (KTOS) 8.32%
- The 3D Printing ETF (PRNT) 6.91%
- L3 Harris Technologies (LHX) 6.75%
- AeroVironment (AVAV) 6.58%
- Iridium Communications (IRDM) 5.42%
- Komatsu (6301) 5.12%
- Blade (BLDE) 3.56%
- JD Logistics (2618) 3.43%
- Velko3D (VLD) 3.35%
Other notable inclusions are Amazon, Google, Unity Technologies, Lockheed Martin, and UiPath.
Who is Cathie Wood?
Cathie Wood is the founder, CEO, and CIO of ARK Invest, which is an asset management firm that invests in technological innovations centered around DNA sequencing, robotics, artificial intelligence, energy storage, and blockchain technology.
Is ARKG a buy?
According to ARK, the “Genomics Revolution” is upon us and will be the most disruptive technology moving forward. The firm believes this industry will create trillions in market cap equities by 2024. If you agree, consider buying ARKG.
Bottom Line: ARKX Forecast & Analysis
ARK has built a reputation on identifying trends before they happen — if anyone is going to have a space exploration ETF, it’s going to be ARK.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we researched ARKX.