Brian Hunt sits down with Matt McCall to discuss the Final Frontier of investing … why this sector has reached its tipping point … practical guidelines for how to invest
Matt McCall’s most recent issue of Investment Opportunities begins with an unusual focus…
New York City elevators.
Matt makes the point that, when standing in the presence of the awe-inspiring New York skyline, it’s easy to forget how all those buildings wouldn’t exist without the elevator.
After all, until its invention, building a skyscraper made no sense. Who would walk up 50 flights of stairs?
But the elevator enabled us to build toward the heavens, constructing worlds in the sky, and creating trillions of dollars’ worth of wealth in the process.
So, why did Matt begin his issue this way?
I’m covering the history of the elevator and its world-changing affects because it may be the single most valuable history lesson you ever learn.
That’s because as I write this, a new innovation is set to launch another building boom toward the heavens.
Like the skyscraper boom of the 20th century, this one will see us constructing new worlds in the sky… and it will create trillions of dollars in wealth.
I want to see us grab our share of this wealth. Which is why this month, we are laying out the big-picture case for investing in the about-to-boom-like-crazy space economy.
In today’s Digest, we’re going to profile Matt’s new space-themed issue of Investment Opportunities.
But we’ll do you one better than that…
A few days ago, Matt sat down with InvestorPlace’s CEO, Brian Hunt, for the premiere episode of InvestorPlace’s podcast, Ahead of the Curve, to discuss the issue.
Ahead of the Curve focuses on “financial foresight, direct access to experts, and actionable investment ideas that can help you achieve financial freedom.”
In the episode with Matt, Brian gets to the bottom of the enormous investment opportunities that are coming our way as the space economy develops. Some of the related stocks have legitimate 20X, 30X, even 50X upside.
So, today, we’re going to feature highlights of the podcast. What’s coming is not only exciting, it’s potentially lifechanging, capable of generating enormous wealth for you and your family.
Let’s jump in.
***Why space investing has reached the tipping point
Matt and Brian begin by pointing toward the recent gamechanger in space exploration – reusable rockets.
Ten years ago, every time something or someone went into space, you had to have a rocket, but it wasn’t reusable.
So, you’d use it once, spend the hundreds of millions of dollars, sometimes billions to build it, and it’s done.
Imagine having to build an elevator every time you want to go to the top floor of a building. That was a very similar situation.
Now, two big names – SpaceX, which is led by Elon Musk, and Blue Origin, led by Jeff Bezos, founder of Amazon – both of them are leading companies right now with reusable rockets.
If you’ve not seen this yet, you have to watch the video. Just, just Google “Space X reusable rocket” and watch how it shoots up and it comes down so slow and it lands itself in a platform. It is absolutely amazing.
Brian asks about the innovations that have allowed us to develop these reusable rockets.
Matt tells us we’re witnessing a convergence of many cutting-edge technologies: there are new, reusable materials themselves, the proliferation of 3D-printing, even advancements with the fuel itself, among other factors.
But the end result is reusable rockets are becoming increasingly affordable. And it’s this decreasing cost that’s driving much of our technological advancements.
The cost right now to launch a satellite is about $60 million. That’s down already from $200 million.
Most people believe reusable rockets will drop as low as $5 million, which is one-fortieth of the cost a couple of years ago.
However, when satellites are mass produced, which could be the next five, 10 years, the decrease in costs could come all the way down to a half-of-one-million dollars to put a satellite in space.
Matt drives this point home in the issue, noting how in the early 1980s, it cost nearly $39,000 to send one pound of stuff into low Earth orbit. By 2020, the cost fell to $432 per pound – a decrease of 99%.
***The investment sectors poised to benefit
At this point in the podcast, Brian asks about the investment implications of space exploration.
You can’t think of space as purely rockets. What else will it lead to?
I tried to find an actual dollar number of the economic impact of going to the moon.
Some funny things came out of it. Dustbusters came out of it. Athletic shoes. Um, there’s so many different innovations… Prosthetic limbs. Things that have changed the world. Laptops, camera, phones.
There was making a small camera for NASA. Black & Decker said that the building of tools for Apollo 11 led to battery power tools that we take for granted today.
The effect of all this had to be trillions of dollars over the years.
Similarly, Matt believes there will be massive investment-ripple-effects from space exploration (I encourage you to listen to the podcast for more details on this point – one fascinating example from Matt is satellites and internet connectivity in Africa).
As the conversation zeroes in on targeted space investments, Matt begins by highlighting 3D technologies:
I mentioned a moment ago, 3D printing.
There’s a company that is going public via a SPAC called Villo 3D. They’re a 3D metal printing company. They help create the engines and components for SpaceX rockets.
Think of how SpaceX will be using rockets for so many companies and countries around the world, and how much demand that will mean for 3D printing. That, to me, is fascinating.
Matt spotlights additional, potential investment areas – the rocket-makers themselves, the companies behind 5G and 6G connectivity, space-tourism-related businesses, artificial intelligence companies, rare earth metal companies (needed for the rockets we’re building).
He summarizes with:
There are so many secondary plays off this that it’s fascinating.
Brian echoes this point, suggesting another interesting idea – there’s so much debris orbiting the earth (with more on the way) that eventually, we’ll need companies to clean it up or it will pose a risk to further space exploration.
***Is a space ETF the answer?
One point Matt stresses is that investors need to be very deliberate about what to do with their investment capital.
He points toward Cathie Wood, the CIO of ARK Invest, who recently launched a space-themed ETF. While Matt is a big fan of Cathie’s, he calls this ETF “a bit laughable.”
Back to Matt:
When you look at the number-two holding, it’s another ETF that she owns in 3D printing. I thought that was a little self-serving.
Again, 3D printing is going to be a huge part of this, but you’re paying double-fees there.
Beyond the fees, Matt points out that John Deere and Netflix are in this ARK space ETF. Good companies, but not exactly two names you associate with cutting-edge space technology…
Brian adds an interesting point here about the challenge an investor faces when trying to align capital with a fledgling megatrend.
You often have this choice between mega-caps, like Google, that have a research and development division that are doing a little bit of work in the sector. So, you might say, “okay, well, I’ll buy this company.” Well, its revenues are barely affected by what happens.
On the other hand, you’ve got very, very tiny, speculative companies that are likely to go bankrupt. Of course, some can go a 100X.
When faced with these tough choices, something that you do that I love is adopt a venture capitalist approach. You buy a basket of these things.
Matt adds more color on this point, noting that investing in too few positions leaves investors vulnerable to single-company risk. What if the company finds itself embroiled in a scandal? What if a CEO dies and Wall Street doesn’t like whomever takes over?
Either situation can crush your investment capital.
On the flip side, Matt points toward the drawback of investing in a broad fund like ARK’s space ETF.
Back to Matt:
ARK has about 38 holdings in it right now. I like maybe five to seven of them.
So, you’re getting 30 stocks I would never want to own. You’re doing it because it’s convenient to buy it.
Keep in mind, I don’t know what the expense ratio is on this. Off the top of my head, I guess it’s probably close to 1%. It comes out in the price throughout the year.
Well, if you build your own, there’s no commission. You’re 1% ahead. And you can go through here and pick the five or six stocks, whatever your number is, and build your own ETF.
On this note, I’ll add that Matt just launched a sub-portfolio in his Investment Opportunities newsletter called, Space: The Final Frontier Portfolio. It holds just two positions at the moment, though Matt will be adding more as research warrants.
His goal is to add recommendations thoughtfully and deliberately, not rushing to bring fill a portfolio just because the space-investment trend is picking up steam.
Brian likens Matt’s space sub-portfolio to a portfolio from any fledgling investment sector – say, the internet in 1993, or cannabis in 2015.
A typical scenario is an investor buys five or six of the best-positioned stocks. Two of them may turn out to be busts, even going to zero. One or two could be average performers. But then, you might hit one high-flier that soars 20X or 30X.
As a whole, the entire portfolio is up huge, and this was done with a reasonable risk/reward blend.
Matt agrees, which dovetails into a fun back-and-forth which I’ve annotated below:
Matt: You have to understand that you’re not going to bat one-thousand. Not every pick will be a winner.
But if you’re right 50% of the time and you manage your portfolio right, you’re going to be one of the most successful investors ever.
Brian: Especially with investing in the early stages of these mega-trends. To some people, it might sound ludicrous that you could have a 20X or 30X winner. But what a lot of people don’t realize is that’s actually routine to to get one of these in the early stages.
For those of you scoring at home, Netflix, at some point, has been up over 400X. Amazon up over 1,000X. So, we’re actually undershooting it a little bit here.
Matt: We always talk about those big-name companies, but it doesn’t even have to be that like that. You know, the best performer over the last 30 or so years is Monster Beverage. It’s up thousands-of-percent.
It’s unbelievable how you can make money. And I know when we say these numbers, people think that we’re just saying this and we’re crazy. But we have the numbers to back it up, which is great.
This issue is running long, so let’s begin to wind down.
I encourage you to listen to the entire Ahead of the Curve podcast. There’s lots of great details we didn’t have time to cover today. For example, Matt details the one thing he believes is required to make money in the space arena
Click here to check it out the show. And be sure to check back in for future podcasts that can help make a difference in your portfolio.
Returning to the opportunities for investors today in space, let’s turn to Matt’s issue to take us out:
Lots of people, including the wealthiest people it the world, believe that space offers the best investment opportunity of the coming decades.
Regardless of which research firm you ask, the space economy is going to be big – to the tune of trillions of dollars. By the end of the Roaring 2020s, Bank of America predicts the space industry will more than triple from today’s value to $1.4 trillion.
To put that number into perspective, the global tourism economy (before the pandemic) was $1.5 trillion.
I believe that number is way below the true potential of the total space economy…
I really do expect this next space boom will see us constructing new worlds in the sky… and create trillions of dollars along the way.
Have a good evening,
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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