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The commercial space sector is one of the most volatile themes in the market. Because space stocks often move up and down together, thanks to macro liquidity, launch successes, or sector-wide risk-on sentiment, how an ETF constructs its holdings matters significantly.
Different space-focused ETFs offer different edges and also weaknesses versus their peers. That beauty, or lack thereof, is in the eyes of the beholder. It often comes down to how concentrated an ETF is. In other words, how few stock holdings it includes. Here are four ETFs I am comparing below:
VanEck Space ETF (WARP) is my favorite in the set. It holds a streamlined portfolio of 22 names, with 10 accounting for 76% of assets. WARP targets pure-play commercial space, launch systems, and satellite infrastructure. It is run by Van Eck ETFs, which has built a reputation for smartly constructed equity funds.
That focused portfolio also makes WARP ideal for chart-based technical analysis. I like that WARP doesn’t stuff big defense conglomerates into the portfolio, focusing strictly on pure-play space stocks. So when that group of stocks moves in sync, WARP provides direct exposure without lagging non-space holdings.
At $36 million in assets under management, WARP is the smallest fund in the group above. Low AUM can mean lower daily trading volume and wider bid-ask spreads. But ultimately, liquidity is about the underlying stock holdings. As we see here, the stocks that carry the portfolio are plenty liquid as of now, with large-cap holdings dominating in terms of total portfolio weight.
3 Other Space ETFs, in Review
Tema Space Innovators ETF (NASA) is an actively managed $1.08 billion fund that combines public pure-plays with selective pre-IPO access. It is the largest fund by market cap in this group. I give it an “honorable mention.”
Procure Space ETF (UFO) is the established passive benchmark for commercial space, holding more than $600 million in assets. And ARK Space Exploration & Innovation ETF (ARKX), Cathie Wood’s actively managed fund focused on space exploration, holds more than $800 million in assets. ARKX has a broad interpretation of space, holding 3D printing, artificial intelligence, and aerospace automation leaders alongside satellite operators. That said, ARKX is not a pure-play space ETF.
How to Trade the WARP ETF After SpaceX Earnings
It is a bit early to perform detailed chart analysis on WARP, as it debuted earlier this year. However, given the drag SpaceX (SPCX) has had on this peer group since its June IPO, when the dust settles from its Tuesday earnings disappointment, WARP has a fighting chance to turn the corner.
I’ll be watching this ETF and its top stock holdings for signs the space race to the bottom slows and creates a real buying opportunity.
Rob Isbitts is a semi-retired CIO, former fiduciary investment advisor, and Barchart columnist. Check out his other work at ETFYourself.com (featuring the Fresh Charts weekly trading post), and ROAR.PiTrade.com, helping investors to better-manage their own portfolios.
