For a relatively low cost, thematic ETFs allow your clients to make bets on industries they expect to thrive. What if they want to invest in space exploration, a futuristic industry if ever there was one?
Ark Investment Management's Space Exploration & Innovation ETF gives investors exposure to companies linked to the space economy, but its holdings are broader than some may expect. Let's break down this ETF in detail and explore whether it's a good investment opportunity for your clients.
What Is the Space Economy?
Simply put, the space economy is the industry that "creates value and benefits to human beings in the course of exploring, researching, understanding, managing and utilizing space." Satellite technology allows streaming services, the internet, and other major technologies to work as they do today.
Investing in the space economy before it becomes even more profitable could be a wise idea.
What is the Ark Space Exploration ETF?
The Ark Space Exploration and Innovation ETF (ARKX), launched March 30, is an actively managed ETF seeking capital growth through investing in both domestic and foreign equity securities. At least 80% of assets are typically invested in companies engaged in space exploration and innovation, according to Ark Invest.
ARKX Performance
As of mid-October 2021, the fund's shares are down about 4.5% since its inception. The ETF has a far lower trading volume than Ark's Innovation ETF, with less than 400,000 shares changing hands per day, versus an average of nearly 5.6 million shares a day for the flagship fund.
How Does the Ark Space ETF Work?
The Ark Space ETF works the same way as other ETFs; investors can purchase ETF shares similarly to purchasing shares in regular companies or organizations. It has an expense ratio of 0.75%.
ARKX is designed to attract forward-thinking investors and regular people who simply want to get in on the space race action by supporting companies that send rockets into space or develop satellite technologies.
What Companies Does the Ark Space ETF Invest In?
The ETF's top 10 holdings are:
- Trimble Inc.
- Ark 3D Printing ETF (PRNT)
- Kratos Defense & Security
- L3Harris Technologies Inc.
- Lockheed Martin Corp.
- Unity Software Inc.
- Iridium Communications Inc.
- Komatsu Ltd.
- JD Logistics Inc.
- UIPath Inc. – Class A
As you can see, several of these companies are directly or tangentially related to space exploration and innovation. But the ETF also invests in a few more curious holdings, including:
- John Deere, a well-known farming supply and tractor company.
- Amazon
- Netflix
- Workhorse, an electric vehicle company.
Asked about the Netflix and Deere investments on CNBC in May, Ark Invest founder Cathie Wood said "the real money-making opportunity is not space tourism [but] mobile connectivity," which uses satellites from companies like SpaceX to connect the unconnected masses to the internet, enabling them to access Netflix.
