If space is the place for your managed fund investment dollars, one new tool, the web-based Space Foundation Index, may offer an intriguing perspective on the sector.
Last month the non-profit Space Foundation of Colorado Springs, Colo., released the web version of the market analysis tool, which is based on a weighted index that tracks the market performance of 31 public companies.
Since its inception in June 2005 through November 30 of last year, the index has increased by more than 39%, outpacing both the NASDAQ and the S&P 500 indices, which grew by 29% and 23% during that period, respectively.
Previously updated annually through the foundation's Space Report, the Space Foundation Index now can be used as an instrument to track the daily market performance of a selection of public companies representing the breadth and depth of the space industry.
The index has two major groups: infrastructure companies and satellite services companies. Within the infrastructure group, the list is divided into space segment sub-system manufacturers and system integrators; the satellite services sector is comprised of consumer/retail services and enterprise/government services.
In the construction of the index, companies were selected based on an evaluation of several criteria, including percentage of revenues attributable to space-related products and services, market capitalization, trading volume, and which U.S. stock exchange the securities or ADRs were listed on.
The contributions of certain component companies' market capitalization to the index were discounted to adjust for lower percentage of revenues attributable to space-related products and services. The level of the index was not directly altered by stock splits, stock dividends or trading halts, nor was it affected by new listings, additional issuances, delistings or suspensions.
Prominent defense contractors on the list include such companies as Boeing, Lockheed Martin, Raytheon and Northrop Grumman. On the satellite half of the ledger, DirectTV Group, Echostar Communications and XM Satellite Radio Holdings are represented.
One factor driving the growth of the companies included in the index is the strong performance of global positioning equipment, direct-to-home television and space infrastructure providers.
"Companies in the Index draw from both governmental and commercial funding sources so we see the area as a growing investment opportunity," said Marty Hauser, vice president, research and analysis at the foundation.
Products and services derived from the space industry form an increasingly large proportion of tools companies use in their daily operations. Initiatives to deliver such capacities as reconnaissance and navigation have become an integral part of the product mix businesses expect to be able to access, Hauser said. And with satellite dishes become more commonplace in communities across the world, the retail consumer is also driving consumption of space-driven products and services.
In fact, heightened sector valuations and the need to cut costs are among the reasons that two index companies, Sirius Satellite Radio and XM Satellite Radio Holdings have a merger deal pending. The potential transaction is currently under review by the anti-trust division of the Department of Justice.
The $5 billion deal is awaiting clearance from Justice and the Federal Communications Commission. When the transaction was announced in February, the companies said they expected it would be completed by the end of last year. Both stocks move together usually, and their combined losses in December, 22% for Sirius and 26% for XM, have undercut the rally the stocks had staged since last summer.
Another attractive aspect of investments in the space industry, according to Hauser, is that the industry is likely to continue to grow regardless of the results of this year's election. With the country at war and an increased emphasis on fighting terrorism, whichever party wins the White House in this year's elections will be unlikely to cut funding for space industry research and development.
The online Space Foundation Index displays the performance of the index companies versus the NASDAQ and the S&P 500 from its inception as well as in daily, weekly, monthly, quarterly and yearly intervals. The Space Foundation Index is updated each business day, shortly after the market's close. In addition, the most recent day's index information appears on the Space Foundation's website for quick reference.
The index was prepared for the Space Foundation by ISDR Consulting.
"We are excited that the Space Foundation Index can now serve as a practical and useful tool for individuals and businesses," Hauser said. "The Space Foundation Index contains timely and critical information, showing market changes at both frequent and extended intervals. It provides tangible data on both the short and long-term growth of this $220 billion industry."
Since the Space Foundation Index was first introduced in 2006, six new component companies have been added. These include Orbcomm and GlobalStar, which both launched operations with IPOs in 2006. Other additions include Hughes Communications, ICO Global Communications, GeoEye and Globecomm Systems. Five other companies were removed from the index because they failed to meet minimum requirements for inclusion.
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