Why Publicly Traded Companies May Win the Space Race

Earlier this week President Obama officially declared that the space race to Mars is on — and, even more crucial, that it will happen under a radically different regime from the prior, Cold War–era contest between the United States and Soviet Union. The president noted that if the U.S. does reach the red planet, which he predicts will happen in the 2030s, it will be achieved through collaboration between the government and companies working in the private space sector.

“The next step is to reach beyond the bounds of Earth’s orbit,” he wrote in an editorial published by CNN. “I’m excited to announce that we are working with our commercial partners to build new habitats that can sustain and transport astronauts on long-duration missions in deep space. These missions will teach us how humans can live far from Earth — something we’ll need for the long journey to Mars.”

It’s thanks to commercial space companies that our dreams of space travel are still plausible, because NASA is no longer the powerhouse it once was. The agency’s budget, which has declined from more than 4 percent of all federal spending in the late 1960s to less than 0.5 percent last year, is a testament to that. Instead of expecting that government research departments will lead the way, the U.S. is essentially betting on the strength and innovative abilities of its private space industry to get to Mars.

In citing the more than 1,000 American companies in private space travel, Obama rightly conveyed the breadth of this industry. When the media and the public talk about the private space race, they are primarily referring to a handful of privately held names and their famous founders: SpaceX and Elon Musk; Blue Origin and Jeff Bezos; Virgin Galactic and Richard Branson. These players are making headlines because they’re supposedly shaping the future of space exploration. Bezos and Musk are important, but equally essential are the public companies creating the technologies that will enable us to send humans to Mars.

Take Aerojet Rocketdyne. On August 31 it successfully tested a critical safety feature for the spacecraft that will be involved in NASA’s Mars mission. The news of this important step forward was effectively eclipsed, however, by the explosion of a SpaceX rocket carrying a Facebook satellite the following day.

But if you look beyond the news, the data around the private sector space race tells a different story. Kensho’s research platform shows that, year-to-date through October 13, publicly held companies in private space exploration have outperformed companies in the broader aerospace and defense community by 6 percent and companies in the technology community by almost 2 percent on a cumulative return basis. Furthermore, examining companies with similar market capitalization across industries reveals that those focusing specifically on the private space field have outperformed their similarly sized peers by more than 6 percent.

Therefore, shouldn’t we pay better attention to the public companies that are killing it in terms of performance and developing the technologies that will propel humankind’s exploration of the final frontier?

The data suggests so.

Get more on the space index.

Kensho is not an investment adviser and makes no representation regarding investment in any fund or investment vehicle. See important disclaimers.