Friday, June 02, 2023
Most people think rocket launches are handled entirely by NASA.
But did you know that the Federal Aviation Administration ("FAA") plays a key role, too?
You see, the increased pace of missions to outer space has the FAA concerned about the possibility of a rocket-jetliner collision. In approving launches and times, the agency now says that to minimize air travel delays, it will give priority to space missions with either a payload or those deemed to be of national interest.
Here's the thing: As much as I applaud keeping the skies safe, the government should be focused on a different aviation-related problem.
It’s a problem that’s becoming increasingly urgent – but could offer the chance for investors like us to profit.
The problem I'm referring to is space debris.
Basically, outer space is filling up with a lot of junk. And while it's a natural byproduct of the emerging space economy – an economy that’s on track to be valued at $1 trillion, by the way – it's a problem that needs addressing now.
According to the United Nations, there are more than 3,000 "dead" satellites and pieces of space junk at risk of collision. And with so many new satellites slated to launch over the next few years, space is only going to get more congested. Consider:
SpaceX plans to have 1,440 satellites beam Internet access down to Earth. And forecasters at Northern Sky Research say there will be nearly 25,000 satellites launched by the end of this decade. That's more than 3,000 every year!
But that may merely be the tip of the iceberg...
Keep in mind, there are no fewer than 70 government space agencies worldwide. And data compiled by World Population Review shows that at least a dozen of them plan to send satellites, probes, and other materials into space.
That tracks with data captured by Space-Track, an online catalog run by the U.S. federal government that's catalogued 40,000 separate entries. These cover de-orbited and in-orbit payloads, rocket ship bodies, and space debris.
Meanwhile, the militarization of space is heating up. The U.S. and Russia are developing hypersonic missiles and potentially hypersonic manned craft that will soon be space-bound. And China, India, and even Japan aren't far behind.
Then there's SpaceX, which expects to play a major role in the outer-space economy. Remember, launching satellites is only a part of this company's mission. It also plans to ferry civilians into space.
That goes for Virgin Galactic (SPCE), too, the spaceflight company founded by Richard Branson. This company plans for suborbital manned flights. And NASA has partnered with Virgin to deliver payloads needed for R&D and future missions.
Earlier, I noted that the space economy is on track to be worth $1 trillion. Analysts believe that'll happen in the 2040s. But Bank of America believes that forecast may be conservative. The real value might go as high as $2.7 trillion.
Clearly, there's a need for an organization to help ensure that manned and unmanned space flights avoid catastrophic collisions.
And as it happens, there's a company that specializes in meeting this need.
In 2020, the firm I'm referring to acquired a company called Analytical Graphics for $700 million. This was a savvy move. Analytical Graphics models and tracks satellites to provide key data on their orbits to make sure they don't run into each other.
And the merger meant that the acquirer is now in line to become outer space's "traffic cop."
Given the fact that the U.S. puts up more satellites – private, institutional, and governmental – than any other country, that's a big job to tackle.
Notably, Analytical Graphics has partners around the world that use its services. And it has a reputation for managing some of the most sensitive information these partners have – a critical part of working in industries like defense, intelligence, and communications.
While the company's recent buyout is exciting, it's hardly the only thing that the acquiring firm has going for it.
The buying company is what I like to refer to as a "simulation company." Let me explain what that means...
Basically, simulation software enables manufacturers to "build" products virtually and test them before physically creating them. That's a move that cuts costs and adds to the bottom line.
Growing at 17% a year, the simulation-engineering market is expected to hit $28 billion by 2026. And the company I'm excited about boasts a roster of impressive clients.
In the construction industry, top clients include Caterpillar (CAT), ABB (ABB), and Rockwell Automation (ROK). In the semiconductor space, it includes Nvidia (NVDA) and Samsung. And in the aerospace industry, Lockheed Martin (LMT) is a notable client.
Additionally, this firm is partnering with Microsoft (MSFT) to create digital twins of equipment or processes that will be automated using Artificial Intelligence ("AI").
With this stock, we get a lot of diversification in one investment. About 50% of its sales come from the Americas, while the remaining half comes from Europe and Asia in an even split.
High tech accounts for 32% of the company's revenue, followed by automotive (19%), aerospace (17%), and industrial equipment (10%).
This year, the company is expected to report per-share earnings growth of 45%, according to data compiled by Investors Business Daily.
Even cutting that in half to be conservative, we'd still see earnings double in just about three years.
That's tremendous potential we don't want to miss out on. So, make sure you're a "Pro" subscriber so you can take advantage of this opportunity!
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Cheers and Good Investing,
Chief Investment Officer
Trend Trader Daily