Since the listing of SpaceX, domestic and international space and aerospace stocks have exhibited high volatility. Given that the sector is still in a growth phase, this volatility is expected to persist. Consequently, experts advise constructing a portfolio by combining companies with established track records, such as SpaceX, with those possessing high growth potential.
Lee Dong-hoon, Research Fellow at Shinhan Investment Corp, revealed these space and aerospace stock investment strategies during an interview with MoneyToday's securities-specialized YouTube channel, 'Bukkumi - Ants Dreaming of Wealth'.
※ You can watch the full interview video on the YouTube channel 'Bukkumi - Ants Dreaming of Wealth'.
Q. What criteria should be established when investing in space and aerospace stocks?
"Space" is not just a vague word laden with dreams; one must focus on the business model. First, you need to see how they make money. In manufacturing, this involves areas such as satellites, launch vehicles, and subscription services. You should also examine whether there is a structure that allows for revenue generation through communications or data. It is also important to identify who the customers are, whether they are government entities or private sector clients. SpaceX generates revenue through 'Starlink.' It has 12 million satellite communication subscribers worldwide. The number of satellites it has launched currently stands at approximately 11,000. Technical differentiation must also be considered. Financial health is inevitably important as well. If the period of unprofitability continues, securing funding naturally becomes critical. Furthermore, there are cases where government investment may be restricted depending on the situation. Therefore, one must assess this level of dependency. In conclusion, a realistic option is to construct a portfolio.
Q. How should the portfolio be structured?
"Companies that are not yet profitable but have long-term growth expectations should be included in the portfolio, even if with a smaller allocation. SpaceX is naturally the main pillar, so it should lead the portfolio. Domestically, one can expect growth from large defense stocks and those linked to the space industry. It would be wise to consider including companies that actually sell components or equipment to customers in the portfolio.
Q. What aspects should be noted when investing in space and aerospace stocks?
"This year has been a textbook example of this. When SpaceX listed in June last year, it generated significant expectations and actually attracted an enormous amount of capital. However, looking at the situation up to now, related stocks have plummeted. Some stocks have dropped by 30% to as much as 50%, and others have fallen nearly 70% to 80% from their peaks. During this period, the KOSPI did not decline that significantly. SpaceX also fell below $150. Why did they drop? In Korea, investors could not receive shares in SpaceX's initial public offering. Because they could not buy SpaceX, supply and demand concentrated on other stocks, leading to a sharp price drop due to the disparity with SpaceX. Regarding this disparity, SpaceX has various different momentum factors. While Korea receives some benefits, there are no stocks that can encompass its entire worldview. Therefore, there was a risk that fragmented stocks rode the trend of companies like SpaceX but failed to match it. In any case, the space industry is currently engaged in various competitions to reduce costs, and this competition must be closely monitored, along with valuations. To respond, one should employ methods such as splitting stock purchase timing and adjusting allocation weights. I believe that by accumulating instruments like ETFs (Exchange-Traded Funds), one should invest in industries that are growing over the long term.
Q. Then, specifically which stocks should be looked at?
"Domestically, Hanwha Aerospace is the main player for launch vehicles. Hanwha Aerospace manufactured the 75th-ton engine used in the Nuri rocket. As the system integration company for the Nuri rocket advancement project, it oversees the entire launch vehicle manufacturing process. In satellites and communications, Hanwha Systems, a subsidiary of Hanwha Aerospace, plays a significant role. It built the Jeju Space Center. Korea Aerospace has strengths in satellite systems. These three pillars are expected to serve as the space hub in Korea. LIG Defense & Aerospace should also be watched. It conducts business in space-related fields such as surveillance and navigation. This Korean version of GPS is referred to as 'KPS,' and it will become the main operator. Hyundai Rotem is an indispensable defense company. It develops methane engines, which serve as a stepping stone toward reusable launch vehicles. In Korea, only Hyundai Rotem is doing this. Additionally, there is Satrec Initiative. It is a satellite-specialized company in which Hanwha Aerospace is the largest shareholder. It holds technological capabilities particularly in medium and small Earth observation satellite systems and satellite payloads.
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