Paul Mampilly is out with a new teaser pitch for his intro level Profits Unlimited newsletter ($47/yr), and it’s built on the big picture themes of patriotism, thirst for exploration, and “A bold plan to make Mars our ‘Second Planet.'” You can almost hear the swelling strings of Bill Conti’s theme music for The Right Stuff in the background. Really gets the loins stirring.
But we’ll step past that part as quickly as we can — we know, after all, that when someone tries to stir your blood with waving flags and patriotic destiny, the odds are pretty good that they’re selling something. I’ll just share a little intro from the pitch here, to get you in the mood… these are Mampilly’s words:
“… if you’re anything like me, you already know there’s an incredible opportunity for exploration, innovation, and investment in space.
“You know that it’s our destiny to explore the stars.
“And you know that it’s America’s destiny to lead the way.
“Just as the early settlers sailed across the Atlantic to find their new home here…
“Just as our forefathers spread across the continent…
“A new breed of brave explorers is preparing right now to carry us to the stars.”
And the goal is to make The Martian reality, and presumably to go a bit beyond putting a lone potato farmer on the red planet…
“…. for the first time ever, the most powerful forces in government, industry, finance, and technology are working toward one common goal…
“A bold plan to make Mars our ‘Second Planet.’
“That’s right … we are on our way toward making a second home for all humanity on Mars. And America — the greatest nation in history — is leading the charge.”
That would, of course, be a massive undertaking — even with huge advances in technology, it would be a more dramatic initiative than the Apollo Lunar landing, which came only ten years after the first man-made object touched the moon, and it will take far longer to get to the prize (it’s been almost 50 years of fitful effort already — the first man-made object “landed” on Mars in 1971, the crash-landing of the Mars 2 mission, then later that year came the successful but extremely brief Mars 3 mission, had a soft landing on the planet before the spacecraft effectively died 15 seconds later).
And yes, space has had a big few years, thanks largely to the renewed lust for life at NASA in the wake of Chinese and European competition (China brought back some rocks from the moon this year, which seemed to light a fire under everyone), and that was fueled further still by the ambitious goals of billionaires, who have grown bored with owning sports teams and want to stake a larger claim on history — Elon Musk’s SpaceX became the first private shuttle service to the International Space Station, and has long had the audacious goal of a Mars mission, Richard Branson is on the verge of selling out-of-the-atmosphere tickets to millionaires bored by Space Mountain, and Jeff Bezos, now that his conquest of earth is nearly complete, is pouring a little smidge of his Amazon profits into bankrolling his Blue Origin space program.
And yes, Mars is on the table, and seems to be the next object of competition — so maybe an international race will light a fire under NASA, like Sputnik did in 1959, one never knows. The US will land another Mars rover in February, and the first Chinese mission to Mars will likely join the Perserverance rover on the surface by April. Even the United Arab Emirates are putting a spacecraft into orbit around Mars, the Hope Orbiter. The moon is back in NASA’s sights, too, with the Artemis program designed to start the work for a permanent lunar mission, and part of that includes some private companies who are participating and might become the first private firms to stick a moon landing. People seem to widely assume that a robust space station or a moon base would be critical to any future Mars mission, so those are nice signs of progress. We might even see a Tom Cruise movie shot in space, if he gets onto that next SpaceX mission to the ISS next October.
We’ll have to see how this all progresses — the reality will move more slowly than the public imagination, but it’s hard to know what will be real catalysts for either government focus or investor attention. Will the launch of the first module of China’s private Space Station conjure up images of Moonraker and push the global competition for space dominance into high gear? Or will a failed launch and a government debt crisis push NASA’s plans out another decade? I have no idea. Maybe it will all come down to Tom Cruise to save the day. Or Elon Musk.
But anyway, Mampilly is pitching his favorite investments for what he says is “easily going to be the biggest investment opportunity in history.” So let’s get to that — here’s more from the ad:
“I’m going to tell you about three incredible, phenomenal companies to invest in that I believe are going to explode as this boom takes hold.
“And I’m going to show you why investors who position themselves today can expect to potentially make a fortune as this whole thing shakes out….
“I believe this crusade to Mars is the biggest opportunity that I’ve shared in my entire 30-year career as a professional investor.”
“Crusade,” eh? That’s an inflammatory choice of words. Maybe that’s why the UAE is sending an orbiter to Mars, too.
And then we get into the specific investment hints:
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“I’ve identified three companies that are mission-critical for America’s crusade to space, the Moon and Mars.
“And early investors who get in now could see these three stocks soar as much as 900% … 1,000% … 3,900% … over the next three to five years.
“And if you think that sounds far-fetched, just take a look at how fast and how much SpaceX has grown in such a short time.
“The company was founded back in 2002. Do you want to know what it’s worth today? An estimated $100 BILLION.
“From $0 to $100 billion in 18 years!”
And Mampilly thinks it will move fast…
“The world is going to be amazed how quickly this all unfolds. Even faster than the first space race when it took the Apollo program seven years to reach the Moon.
“JFK gave his famous ‘We choose to go to the Moon’ speech at Rice University on September 12, 1962…
“And Neil Armstrong uttered his immortal ‘one small step’ statement less than seven years later on July 20, 1969.”
I have no doubt we CAN make a manned mission to Mars in my lifetime (I’m 50)… whether we’ll prioritize that as a nation and a world, though, I have no idea… given our history, it will probably take a new Cold War with China to really ramp up investment again, and maybe that’s coming. The Apollo Program that really created NASA ate up close to to 5% of the US federal budget in the lead-up to first lunar missions in the mid-1960s — if you adjust for inflation, NASA’s budget has been in slow decline for 30 years, since the heyday of the Shuttle program, and currently makes up about one half of one percent of the federal budget.
Mars has been at least a quiet goal for 50+ years, and yet there have been some big gaps during that time (18 years, at one point) when no launches or new advances were really made. Heck, the US has relied on Russian rockets to get our astronauts to the International Space Station for ten years since the last Space Shuttle launched in 2011. And the previous big push to reinvigorate space exploration, NASA’s 2004 Constellation project that was expected to get back to the moon by 2020 and go from their to a manned Mars mission, was scrapped during the budget crises of 2009 after many years of delays… though, to be fair, some of the work done on Constellation formed the groundwork for the Orion project, which now hopes to put US boots on the moon in 2024 (but maybe don’t hold your breath on that 2024 deadline).
I’ve gotten off track again, sorry… so what are those stocks Mampilly is touting as space investments? Here’s his pitch on that:
“I have identified three phenomenal plays…
“One in particular has so much potential that just a tiny $250 stake should return $10,000 in as little as four years…”
And the important caveat, which should be in a bold headline but always seems to be buried in the small print:
“Now just to be clear … I never recommend going all in on one stock. I always advise folks to put equal amounts in every position. And no investment is a sure bet … you should never invest more than you can afford to lose.”
So yes, if you’re one of those folks who just got into investing in April because you were stuck at home with nothing better to do, we should include our public service note here: Sometimes stocks go down.
I mean it! Really, you can look it up. Even space stocks. The aerospace and defense sector fell along with everything else in 2008, even with the US in the middle of its longest-running war and before NASA got its lunar budget cut and dropped the Space Shuttle, and didn’t recover to 2007 highs until 2013 (most “space” stocks are really “space and defense” stocks — rockets and missiles are essentially the same thing, just aimed differently).
But anyway, Mampilly has a couple lists of three for us — three catalysts, and three stocks primed to profit from those catalysts:
“Three Reasons Investors Will Start Pouring Into Space Stocks…
“Over the next year or so, three game-changing developments will kickstart a massive run-up in a handful of space stocks that I’ve identified…
“Development #1 — SpaceX Goes to Mars…
“In a little more than a year from now, the company — which was founded with the goal of putting humans on Mars — will send its first robotic mission to the Red Planet.
“This will be the first Mars mission by a private company.
“It will also be the maiden voyage of Starship, the spaceliner developed to carry people and cargo between the Earth and Mars.
“And, most importantly, it’s just the company’s first step toward building a Mars colony…”
I don’t know where Mampilly gets “a little more than a year” from as a timeline, the current goal of SpaceX’s Starship program is to launch a Mars mission in 2024. That requires first getting the Starship to orbit, then having multiple heavy-load Starships that can act as tankers to go to orbit as well and refill the Starship for the launch from earth orbit to Mars, and the Mars “window” when it gets relatively closer to the earth and makes a mission more feasible comes only once every couple years. Maybe the Starship and SpaceX’s Mars goals will get more press in 2021, but they won’t be launching a mission this year. The next big high-profile move from SpaceX, when it comes to actual space travel and exploration, might be their planned mission to launch Japanese billionaire Yusaka Maezawa on a flyby of the moon in 2023, using the Starship rocket (which would be really cool, but, we should remember, by then it will have been 55 years since the Apollo 8 mission did essentially the same thing).
And catalyst two:
“Development #2 — NASA Is Going Back to the Moon…
“You may remember Artemis from earlier in the presentation. It’s the NASA program that will establish a permanent American presence on and around the Moon. And the first launch takes place next year.
“Over the course of approximately 50 missions, the Artemis program will construct the Lunar Gateway (an orbiting space station) and the Artemis Base Camp (a permanent lunar settlement).”
That’s currently the plan, the first iteration of the Orion spacecraft for the Artemis I mission is being built in Florida right now, and they’re hoping to launch in November of 2021. Will it ignite public interest? Maybe. More from Mampilly…
“We’ll get to watch American astronauts step foot on the Moon again…
“See them build a new space station in lunar orbit…
“And take a virtual tour of America’s permanent Moon base…
“The media frenzy over this is going to be huge. And investors will start pouring money into space stocks as quick as they can … especially when Big Business head to space too.”
OK, so this is really just a test launch in November… nobody’s building a moon base, and no US astronauts will even be stepping on the moon again until probably 2024 at the very earliest. But sure, maybe that will get folks excited about space again — surely space was a hot cultural idea as soon as the Apollo missions started, excitement builds as progress is made… John Glenn orbiting the Earth in 1962 was an exciting moment, people didn’t wait until the success of the 1969 Apollo 11 moon landing to get excited about space travel (and, apparently, that wasn’t deterred too much by the tragedies or missteps along the way, including the Apollo 1 fire in 1967).
And on that point of “public fascination” we get the next catalyst:
“Development #3 — Hollywood Heads to Space…
“Tom Cruise — one of the most popular actors of all time — will launch into space on SpaceX’s Crew Dragon and film an action movie on board the International Space Station (ISS).
“Now I know this may not seem on par with the first two catalysts. But when you consider this will be the first movie filmed in space — and that it features one of Hollywood’s biggest stars — the media hype surrounding it is sure to be greater than anything we’ve ever seen.”
Could be, there was certainly a fair amount of hype around that already — Cruise and director Joel Liman, along perhaps with some buxom female costar yet to be named, are planning… tentatively, it sounds like… to go to the International Space Station to film part of a movie in October, with NASA involved mostly because they want to rev up interest in space and they’re hoping Tom Cruise can do for astronauts and space exploration what he did for Navy aviators in 1986. Or, perhaps, for prostitution in 1983. This sounds so insane that it might even happen… if they do more than a cameo from the space station, I’ll be quite shocked, but even that would probably capture the public imagination. Whether that means he’ll put the promo campaign for his latest Mission: Impossible film (number 32, is it?) on hold to get into a SpaceX capsule in October, well, your guess is as good as mine.
What was it I was talking about? Right, investments! What stocks are in Mampilly’s wheelhouse here?
“We looked at the aerospace companies that are building the rockets and spacecraft…
“We kicked the tires on the 3D printing companies that are helping build rockets, spacecraft, and space bases…
“We vetted next-generation chemical companies working on ‘fuels of the future’…
“We even checked out real estate investment opportunities in commercial space industry hotspots throughout Florida, New Mexico, Texas, Virginia and Alabama…
“And after all that exhaustive search, three companies had all the right qualities to hand us fortune-making gains in as little as three years…”
Ah, so now it’s “as little as three years” — that gives us more of a patient outlook than the “get in now!” headlines, no? That’s based on the various “big mission” timelines that see a return to the moon in 2024, though, of course, such timelines are always subject to revision.
But what are those three stocks? Here are the hints we get:
“Space Stock #1 — A One-of-a-Kind Space Company:
“The first stock in my top three list is truly one-of-a-kind.
“It’s just a few years old, but this multiple-award-winning company is already going toe-to-toe with the commercial space industry’s 800-pound gorilla … SpaceX.
“Building on its proprietary rocket technology, this hungry start-up is already at the forefront of the new space economy — a soon-to-be trillion-dollar market!
“I’m absolutely convinced this stock can soar 3,900% — that’s right 3,900% — in just five years.”
And that’s it for clues… so I must admit that this is truly a guess, but the overwhelmingly likely match here is Virgin Galactic (SPCE), Richard Branson’s space tourism company that came public through a merger with Chamath Palihapitiya’s first SPAC about a year ago, helping to ignite both investor interest in space and the current SPAC mania.
And the share price has come down in recent weeks, so now is at least a better time to think about Virgin Galactic than we saw a month ago — mostly because they had a hiccup in their flight testing in mid-December, when a test flight was aborted. The good news is that their systems worked, the flight was aborted when the rocket ignition failed, and the launch vehicle landed safely… the bad news is that the aborted flight probably delays the first commercial flights a bit more.
Richard Branson, the billionaire playboy and thrill seeker who founded the company and bankrolled its initial work, is planning on being on the first commercial flight for Virgin Galactic… and they still think that will happen in 2021, though I think everyone would be shocked if they hit their initial goal of “first quarter” for a commercial launch. They have 900 deposits for reservations on future flights out of their New Mexico spaceport, plenty of cash still for the moment (thanks to a secondary share sale over the summer), and some NASA contracts that are helping to push their supersonic flight technologies forward, with the more mundane Virgin Orbit satellite launch business running in parallel to the development of the Virgin Galactic space tourism program, so it’s not a terrible idea. Still a speculation, for sure, but the investment model clearly makes sense IF they can safely establish a commercial spaceflight schedule and start taking those folks out of the atmosphere.
Virgin Galactic won’t be doing any heavy lifting for flights to the moon or Mars anytime soon, for sure, but they are likely to be the first mover in space tourism… and if space becomes hot and sexy again, and a national priority as Mampilly projects, then it’s certainly reasonable to expect that SPCE shares will benefit from that attention.
It helps that their unit economics make sense — if they can reuse their launch vehicles as anticipated (with a new engine each time), and book out their flights fully with wealthy folks who are ready for the next thrill and crave the zero-gravity Instagram photos to wow their followers, then they can actually be cash flow positive pretty quickly. It would not be at all surprising if they hit more hiccups, space is obviously hard and challenging and it would only take one real disaster to set them back ten years, but it’s a rational speculation if we assume that they will be starting commercial flight in the next year or so, the construction of their additional vehicles (the second SpaceShipTwo is almost done, but they want to have several vehicles in operation eventually), and that they will be able to sell those tickets for $250,000 a pop (that’s what they were priced at when they sold some back in 2014, before test flights were aborted because of an accident, though they also noted last month that they’ll probably raise those prices considerably). Their new CEO came from Disney, so if you’ve ever been to Disney World you can probably guess that we’ll see a laser focus on image and safety… and a ticket price that’s probably a lot higher than you imagined (photos for Instagram and a live stream of your flight? That’ll be an extra $100,000, please. Kiss on the cheep from Richard Branson? That will be $300,000, shall I bill it to your room?).
They’ve made promises along these lines before, with the first commercial flights previously predicted for the middle of last year, but COVID-19 and other challenges slowed them down a bit. According to the latest financial projections they’ve dangled on conference calls, if they sell out their flights (six passengers per flight, 50 flights a year per ship), then those $35 million SpaceShipTwo vessels could pay for themselves in about 6-9 months. I don’t know when they run out of people who are willing to pay a quarter of a million dollars or more for a “sort of going to space” experience in the upper atmosphere, or what the actual operating costs of a spaceport and a suborbital airline will look like when they’re actually operating instead of just throwing out projections, but there is at least some logical space for this to work. Which is probably enough, for a hot story… as long as they get those next test flights successfully into space before too long, including Sir Richard Branson’s flight (he’s planning to be on the third flight of SpaceShipTwo, the first one they’re calling a “commercial” flight after the first two missions launch test pilots — that’s the mission that was aborted in December — and then a few “test passenger” employees to try out the passenger cabin).
The presence of celebrities and the eagerness of some megamillionaires to buy tickets to the International Space Station on a SpaceX Dragon capsule, or minor millionaires to buy Virgin Galactic tickets, underscores the fascination with space and the urge to be a pioneer… but it also probably underplays the risks. We’ll see how it goes, but I think Virgin Galactic is a rational speculation… as long as you are comfortable with it being genuinely speculative, and maybe falling by 80% if they have a launch failure and have to postpone commercial flight for a few more years (they’re about 20 years in now, with one big disaster when SpaceShipTwo broke apart in flight in 2014 and killed a co-pilot — they’ve only been public for a year, but space takes a lot of time and money and gives little wiggle room).
“Space Stock #2 — The Belle of the Big Money:
“My next favorite space stock is another strong American company, employing more than 2,000 people.
“It’s got annual sales of around $600 million , and it’s valued at less than $1 billion….
“… it’s at the center of the biggest revolution in manufacturing in decades. A revolution that has made it an important part of America’s crusade to space, the Moon and Mars.
“And its technology will be absolutely indispensable as our astronauts and colonists spend more and more time away from Earth….
“Right now, the stock is trading under $15 per share.
“But I think it could hand us a gain of 1,000% in the next three to five years.”
Those clues could point to either of the leading 3D printing companies, 3D Systems (DDD) or Stratasys (SSYS), though that “under $15 a share” points to 3D Systems.
3D Systems (DDD) does have about 2,500 employees, and in recent months it has had a $1 billion valuation (it’s a little above that right now, at $1.3 billion), and had about $600 million in revenue in 2019 (it was down to about $540 million over the past year). And yes, it is well below $15 — right now it’s around $10, over the past year it’s seen both $4 and $12. DDD is roughly the same size, in terms of both market cap and revenue, as its primary competitor Stratasys (SSYS)… and both have essentially traded on sentiment for the industry, which has been predicted as the next great growth industry a few times in the past but hasn’t really taken hold yet.
The 3D printing stocks all enjoyed a mania coming out of the financial crisis, for a few years (particularly 2012-2104), but the lack of real revenue growth kept them from building on that mania. Maybe that changes with technologies that continues to advance, and with the push into space, maybe not, you’ll have to make your own call on the probabilities… but Mampilly has been teasing DDD as the next big thing for a year now, so this is consistent with his thinking.
And we’re a long time form colonizing the moon, let alone Mars, but sure, if we ever do then some form of 3D printing will likely be important, if only for making spare parts when you’re 100 million miles away from Cape Canaveral. Whether that does for 3D printing companies what the launch of NASA did for Tang, well, I don’t know. I confess to being pretty skeptical about all of the 3D printing stocks, if only because I wrote about them a lot during the last wave of 3D enthusiasm in 2013 and 2014, when they were about to take over the world… and both SSYS and DDD have had roughly flat revenues over the past five years (OK, they’re not flat, they’re down about 20% … but I’m trying to be generous, with the pandemic and all).
“Space Stock #3 — Our Play on “Digital Steel” for Space:
“The last of my three favorite space stocks is a very special company.
“It makes ‘digital steel’ products that solve its customers’ most difficult design challenges. And it’s been doing so since the late 1950s.
“Now I won’t get into the technical details here.
“What I can tell you is that this company is the biggest and strongest of my three favorite space stocks…
“It serves more than 120,000 customers in the aerospace, defense & security, communications and industrial markets…
“Its market cap right now is a little under $40 billion…
“And I believe it can be a $350 billion company in five years.”
Interesting, no? What the heck is “digital steel,” anyway? Here are the rest of the clues…
“… this company is already a leading maker of cutting-edge tech products for missions to the Moon, Mars and beyond. Products that are qualified to the highest standards of NASA, the Defense Logistics Agency, and the European Space Agency.
“I don’t know of any other company that can match its history or its lead over competitors. I mean it’s got 3,765 government patents in the U.S. alone.
“And thousands more in about three dozen other countries around the world…
“That’s why the world’s most important space companies — companies like SpaceX, Blue Origin, Relativity Space and Rocket Lab — will most likely have nowhere else to turn.”
Thinkolator sez our best match here is Microchip Technology (MCHP), which does indeed have a meaningful business in microcontrollers and chips for aerospace, and boast 120,000 customers and a market cap “a little under” $40 billion (it’s around $37 billion today at a $137 share price, roughly where it was for most of December). I wouldn’t get too hot and bothered about space as a major driver, aerospace and defense is only about 12% of Microchip’s revenue, but they are exposed to plenty of pretty strong trends (5G, electric vehicle charging, etc.), and they are saying, as of their last wave of investor presentations, that they think they’ve passed the low point and are growing out of the pandemic trough now. There are other chip and electronic component suppliers who have a meaningful business in aerospace, though they tend to be the same folks who compete across most automotive and industrial sectors as well, firms like Infineon (IFNNY) and Teledyne (TDY), though none of them match the clues as well as Microchip.
Sales are pretty flat for MCHP right now, but they are improving their margins gradually, and they’ve been paying off or refinancing their debt pretty aggressively, and paying a small dividend (yields roughly 1% right now), so there is some possibility that they’re at a meaningful inflection point now, where even a single-digit burst of revenue growth could lead to a substantial boost in earnings. That, and the restructuring of their debt and their optimistic talk at their last earnings call, drove the shares up to new highs in November and early December — so I’d guess that a lot is riding on their ability to actually post that growth in the next couple quarters, but the valuation is not particularly ridiculous. MCHP is halfway through its fiscal 2021, and is trading at about 21X current year earnings estimates or 19X 2022 estimates. That’s not necessarily cheap for a company that is growing slower than the market, but I guess we have to reset our expectations a little bit, too — these days, 20X earnings sounds almost quaint, like buying a 50-cent candy bar.
So… I wouldn’t try to talk you out of buying Microchip. They’re doing the right things, fixing their balance sheet and improving their operating margins, and they’re exposed to lots of growing industries that could help goose their returns just a little bit if the economy does OK coming out of the pandemic in the Spring and Summer and demand gets the juice that most people seem to expect. It won’t be an earthshaking space play, but it could certainly be an above average stock for the next couple years.
And that’s all I’ve got for you on this return to the world of teasers post-holidays — thanks for reading, and if you’ve got ideas on these three stocks, or on investing in space in general, please do jump in and share any thoughts you might care to put in writing with a comment below.
P.S. Paul Mampilly’s Profits Unlimited is among the more actively promoted newsletters out there, so we hear from readers pretty regularly — but if you’ve ever subscribed to that service, please do visit our Profits Unlimited Reviews page here to share your experience with your fellow investors. Thanks!