Investing Opportunities in Trump's "Space Force"
On Monday, President Donald Trump caused yet another social media stir by officially ordering the establishment of the United States Space Force, a proposed sixth branch of the U.S. military.
The move drew plenty of mockery and bewilderment from various tribes on social media, but despite the fantastical and seemingly ridiculous notion of a “Space Force,” the haters and hecklers won’t be getting the last word on this one.
The United States Space Force is real, and it will be far more meaningful than many people currently think.
Back in the summer of 2016, the Government Accountability Office (GAO) noted “persistent fragmentation in management and oversight” of U.S. military space systems. The GAO warned in a report that the DOD lacked a single authority to align our vast array of critical operations in space.
All told, it was determined that the DOD’s space leadership responsibilities were fragmented across 60 different stakeholder organizations involved in developing space and ground systems relating to space warfare.
So while politics may have given rise to early ridicule, the need to consolidate U.S. space systems under a single military umbrella isn’t really debatable, nor is the creation of a Space Force without historical precedent. In fact, it’s exactly what we did by establishing the Air Force in 1947 as humans took to the skies, the only difference now being that we’re taking to the stars.
It should go without saying that space exploration and dominance has become deeply ingrained in American culture. Apollo 11 represented what symbolically became the greatest victory of the Cold War. Sending the first men to the moon, and continuing to lead space exploration to this day, has become a source of national pride for the U.S.
But where space exploration was once mostly a clash of national egos, it has matured fully to a clash of national security. Space and related ground systems have become absolutely critical for things like military navigation, recon, communications, command and control, precision targeting, and so forth.
As The National Interest reports, space systems, namely satellites, would be America’s Achilles heel in war. China’s anti-satellite missile test in 2007 was a stark wakeup call to anyone paying attention. A decade later, we’re finally getting serious about our military presence in space.
While the U.S. Air Force Space Command has been in operation since 1982, the creation of a unified and standalone military branch indicates an unprecedented expansion of space-related military efforts. It also represents the biggest reorganization of the American military in over 70 years.
As investors, we certainly have our ears perked up. After all, more than half (~54%) of the U.S. budget goes to military spending.
Notably, the U.S. Air Force has a discretionary spending budget of ~$160 billion a year. It’s not at all a stretch to assume the Space Force will mature to be somewhere in the same ballpark not too far down the line.
This should obviously be taken as a bullish indicator for the aerospace and defense industry, which has already proven immensely profitable for investors who had the foresight to bet on its biggest projects and initiatives.
Just to give some additional perspective, when Lockheed Martin’s experimental X-35 fighter jet (the precursor to the $406 billion F-35 program) first took flight in October of 2000, the company was trading at $31.00 a share.
Today, Lockheed trades above $300, as the F-35 has earned absolute dominance in the global market. That’s nearly a 10x return.
Of course, this is just one example of an investment opportunity in military spending, but the broader aerospace and defense industry is no stranger to such growth. The iShares U.S. Aerospace & Defense ETF, for instance, has provided investors with a 282% return since its inception in 2006.
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The question investors should be asking now, of course, is which companies will prosper most as the age of the Space Force comes to fruition? That is, who will be supplying and manufacturing the F-35s of space?
While it’s certainly true that TIE fighters and X-wings are starfighters strictly reserved for science fiction, the reality is that space planes and fighters aren’t actually a far-off fantasy.
DARPA’s experimental XS-1 space plane, for one, is currently in Phase 2/3 of development, with test flights scheduled to start in 2020. Originally announced in 2013, the initiative ramped up last year when DARPA selected Boeing to finally build and test the plane.
In the same sense that Lockheed Martin’s X-35 had once matured into the F-35, the XS-1 is likely to open the doors to an entirely new generation of military space planes, which will ultimately be used by the Space Force to service and protect critical space systems.
That gives Boeing’s XS-1 potential to be a long-term goldmine for shareholders of the parent company as well as its component suppliers.
It could also prove disastrous for conventional launch companies like Orbital ATK (now owned by Northrop Grumman) by drastically reducing the cost of getting payloads to space.
None of this is even to mention the emerging commercial space industry being actively pioneered by the likes of Elon Musk, Jeff Bezos, Richard Branson, Paul Allen, and so forth. Combine these efforts with the launch of a United States Space Force, and it’s obvious that the emerging space industry is poised to be an investor’s paradise.
It’s still early, of course, but we intend to ramp up coverage wherever it’s relevant. Keep your eyes peeled in future issues for the most promising opportunities in space technology. Until next time, Jason Stutman Jason Stutman is Wealth Daily's senior technology analyst and editor of investment advisory newsletters Technology and Opportunity and The Cutting Edge. His strategy for building winning portfolios is simple: Buy the disruptor, sell the disrupted. Covering the broad sector of technology and occasionally dabbling in the political sphere, Jason has written hundreds of articles spanning topics from consumer electronics and development stage biotechnology to political forecasting and social commentary. Outside the office Jason is a lover of science fiction and the outdoors, and an amateur squash player at best. He writes through the lens of a futurist, free market advocate, and fiscal conservative. Jason currently hails from Baltimore, Maryland, with roots in the great state of New York.
Until next time,
Jason Stutman is Wealth Daily's senior technology analyst and editor of investment advisory newsletters Technology and Opportunity and The Cutting Edge. His strategy for building winning portfolios is simple: Buy the disruptor, sell the disrupted.
Covering the broad sector of technology and occasionally dabbling in the political sphere, Jason has written hundreds of articles spanning topics from consumer electronics and development stage biotechnology to political forecasting and social commentary.
Outside the office Jason is a lover of science fiction and the outdoors, and an amateur squash player at best. He writes through the lens of a futurist, free market advocate, and fiscal conservative. Jason currently hails from Baltimore, Maryland, with roots in the great state of New York.
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