Space stocks and ETFs have received plenty of attention in 2020 and at the start of the new year. President Biden is fully backing former President Trump's Space Force. This decision is music to the ears of space stock/ETF investors.
Instead of attempting to sort through all of the space industry stocks, the better approach is to invest in space ETFs. Contrary to popular opinion, there are several space ETFs to choose from, many of which are worth serious consideration from an investing perspective.
Let's take a look at three of the top Space ETFs: Procure Space ETF (UFO), Invesco Aerospace & Defense ETF (PPA), and SPDR S&P Aerospace & Defense ETF (XAR).
Procure Space ETF (UFO)
UFO is a space ETF that tracks worldwide aerospace corporations. This ETF is tier-weighted. In fact, UFO is the first-ever worldwide aerospace and defense ETF. Check out the UFO holdings, and you will find the companies that comprise this ETF span numerous industries ranging from space tech companies to space intelligence and imagery services, satellite companies, and rocket manufacturers.
UFO is split into two distinct tranches. The initial tranche consists of non-diversified businesses that draw a minimum of half their revenue from operations related to the business of space. The second tranche consists of companies that make space industry equipment and technology. It is particularly interesting to note this diversified group of companies consists of 20% of UFO's weight while 80% of the fund consists of the first tranche's non-diversified stocks.
The top UFO holding is Gilat Satellite Networks (GILT), followed by Virgin Galactic Holdings (SPCE) and Iridium Communications (IRDM). Additional UFO holdings include ViaSat (VSAT), Maxar Technologies (MAXR), and Trimble (TRMB).
Check out the UFO POWR Ratings, and you will find the ETF has an A grade, meaning it is a Strong Buy. Furthermore, UFO has A grades in the Trade and Peer components of the POWR Ratings. You can find out more about UFO's POWR Rating components by clicking here. All in all, UFO is ranked 54th out of 106 ETFs in the Technology Equities ETFs category. If you would like to find other top Technology Equities ETFs, click here.
Invesco Aerospace & Defense ETF (PPA)
PPA tracks stocks in space, military, defense, and homeland security industries. This is a market-cap-weighted ETF. The overarching aim of PPA is to provide investors with extensive exposure to myriad stocks within the space and defense industries.
PPA has successfully diversified its portfolio through the use of position caps. Just under 60% of PPA holdings are in the Aerospace and Defense industry. Slightly more than 12% of PPA's holdings are in IT Services. Nearly 7% of PPA's holdings are in industrial conglomerates.
Raytheon Technologies (RTX) is PPA's top holding, followed by Boeing Company (BA), Lockheed Martin Corporation (LMT), Honeywell International (HON), and Northrop Grumman (NOC). PPA has A grades in the Buy & Hold and Trade components of the POWR Ratings. If you are curious about how PPA performs in the Peer component, click here to learn more.
Of the 32 ETFs in the Industrials Equities ETFs category, PPA is ranked 12th. You can find out other top ETFs in the Industrials Equities ETFs category by clicking here.
SPDR S&P Aerospace & Defense ETF (XAR)
XAR consists of United States-based space and defense companies that are equally weighted. This ETF is primarily focused on large-cap/mid-cap stocks, with 40% of the holdings consisting of large-caps, 40% consisting of mid-caps, and 20% consisting of small-caps.
XAR has A grades in the Peer and Trade components of the POWR Ratings. You can learn more about XAR's additional POWR Ratings components by clicking here. Of the 32 ETFs in the Industrials Equities ETFS category, XAR is ranked 7th. If you want to find other top ETFs in this category, click here.
XAR is overweighted toward aerospace and defense stocks, with more than 87% of its holdings in these industries. XAR holdings also include stocks in the Communications, Electronic Equipment, and IT Services spaces. XAR's top holding is SPCE, weighted at 6.03%. XAR's next largest holdings include Axon Enterprise (AAXN), MAXR, Aerojet Rocketdyne (AJRD), and Kratos Defense & Security Solutions (KTOS).
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UFO shares were trading at $31.48 per share on Friday morning, down $0.02 (-0.06%). Year-to-date, UFO has gained 23.50%, versus a 4.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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