With the stock market crashing, nothing may seem “hot” at the moment but don’t be blinded by short-term events. It is when stocks are down that you want to buy. It’s the perfect opportunity to put into action the philosophy of buy low, sell high.
And some of the hottest stocks will be those involved in the new space race. Space stocks offer the potential for tremendous returns, so long as you have an appropriate investment horizon.
Even in normal times, investors should hold a stock for a minimum of three to five years but a decade would be best. Or as Warren Buffett once said, “the best time to sell is never.” But in turbulent markets, a long-term investment horizon is essential.
Of course, even Buffett doesn’t strictly follow that advice. He just dumped a boatload of stock onto the market to bring Berkshire Hathaway’s (NYSE:BRK-A, NYSE:BRK-B) cash position to a massive $277 billion. But that means he has plenty of dry powder to be a buyer when the dust settles. You should too.
Below are the three best space stocks to consider buying for your portfolio with those cash reserves.
Lockheed Martin (LMT)
As the largest U.S. defense contractor, Lockheed Martin (NYSE:LMT) doesn’t receive much attention as a space stock. However, the segment is a growing one and generated over $3.2 billion in revenue in the second quarter, or almost 18% of the total. Space also accounted for 17% of Lockheed’s operating profits, giving it 11% operating margins.
It’s true that buying Lockheed stock means you are primarily buying a military contractor, but one with a space kicker. It also means virtually all of the defense and aerospace company’s revenue comes from the government, both domestic and foreign. That does make it subject to the vagaries of defense budgets, even if it is a government priority that typically rises year-to-year. Yet with so many hot spots raging around the world and with the U.S. military’s munitions stockpiles reduced, the likelihood of any material impact on Lockheed’s business is minimal for the foreseeable future.
Even in the current market collapse, LMT stock is down less than 1%, indicating it has limited downside risk. With funding from the Defense Dept. and NASA flowing through it, Lockheed is a space stock to buy.
Redwire (RDW)
There are more than 3,400 U.S. satellites orbiting the earth that will increasingly contain hardware and infrastructure from Redwire (NYSE:RDW). The space stock provides avionics, sensors, power generation and structures for them. It is also behind rockets going into space, to the Moon and beyond.
In cooperation with Lockheed Martin, Redwire provides NASA’s Artemis program with the Orion Camera System for advanced imaging capabilities. It was also the “eyes” for Lunar Interactive’s (NASDAQ:LUNR) lunar lander that touched down on the Moon earlier this year.
The space stock also notes it is providing on-board computers for the European Space Agency’s Hera and Comet Interceptor projects. In May, it was chosen by Rocket Labs USA (NASDAQ:RKLB) to provide antenna and RF hardware for its rockets contracted by the Space Development Agency.
The space stock is still a small player but is rapidly growing. Revenue was up 52% in the first quarter to $87 million allowing it to produce adjusted EBITDA of $4.3 million. This is an up-and-coming space stock that offers exciting growth potential.
ARK Space Exploration & Innovation ETF (ARKX)
Instead of picking and choosing a winner amongst many possibilities, buying a basket of space stocks may be a better option. ARK Space Exploration & Innovation ETF (NYSEARCA:ARKX) is one of the exchange-traded funds (ETF) actively managed by investing guru Cathie Wood. It buys stocks focused on space exploration (hence the name) but it also seeks out companies that benefit technologically from products or services that “occur beyond the surface of the Earth” (the innovation part).
That gives the ETF some wide latitude in the stocks it buys. So while investors will find the likes of Lockheed and Rocket Labs in the portfolio, there are also electric vertical takeoff & landing aircraft makers Joby Aviation (NYSE:JOBY) and Archer Aviation (NYSE:ACHR); 3-D printing stock 3D Systems (NYSE:DDD); and, inexplicably, farm equipment manufacturer Deere (NYSE:DE), though it may have to do with the GPS and satellite navigation farm equipment it offers.
ARK Space Exploration & Innovation ETF has $231 million in net assets and a reasonable expense ratio of 0.75%. The stock had been doing well in 2024 until the sector rotation away from tech names began last month. It dropped sharply with the market rout on Monday and trades down 8% for the year.
Still, it represents a good investment for long-term investors who seek to capitalize on the renewed interest in space exploration.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.