This Futuristic Theme Is Holding Up Despite The Market Rout. Should You Buy?

While our theme of Space Stocks – which includes U.S.-based established aerospace players, upstart space companies, and satellite communications firms – has declined by about 9% year-to-date, it has considerably outperformed the broader S&P 500 which remains down by over 16% over the same period and the Nasdaq-100, which has declined by over 25%. While high-growth and futuristic stocks have been impacted by rising inflation, which has forced the U.S. Federal Reserve to raise rates at a faster than expected pace, space stocks have held up better, given that the theme also includes defense contractors and satellite technology players, who are likely to benefit from the elevated geopolitical tensions and rising defense spending following Russia’s invasion of Ukraine.

Although the theme could remain volatile in the near term, there is still a pretty good case for investing in space stocks for the long haul. There has been a gradual shift from government-driven space programs toward privately run programs, and this could bode well for the companies in our theme. Enterprise-backed space programs saw much progress through the Covid-19 pandemic, with the likes of SpaceX, Virgin Galactic, and BlueOrigin launching multiple crews and high-profile individuals into space and this trend is likely to continue. Moreover, new markets are opening up, ranging from reusable rockets, satellite-based Internet, space tourism, and point-to-point transport around the earth and this could drive revenue growth for the theme in the long run.

Within our theme, Lockheed Martin (NYSE:LMT) has been the best performer, with its stock up 23% year-to-date in 2022, driven partly by the ongoing tensions between Ukraine and Russia, which have been driving defense stocks higher. On the other side, Virgin Galactic (NYSE:SPCE) a small-cap, pure-play space tourism player, has been the worst performer, with its stock down by over 50% year-to-date.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns	May 2022 MTD [1]	2022 YTD [1]	2017-22 Total [2]
SPCE Return	-19%	-55%	-40%
S&P 500 Return	-3%	-16%	78%
Trefis Multi-Strategy Portfolio	-7%	-23%	205%

[1] Month-to-date and year-to-date as of 5/10/2022
[2] Cumulative total returns since the end of 2016

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