How And Why To Invest In “SpaceBook”
“We’re At Now Now.” — Spaceballs
As Colonel Sandurz, Dark Helmet and President Skroob realize that the air is being returned to Planet Druidia, thanks to Lone Starr’s use of the “Schwartz,” this is the memorable line uttered by the Colonel. It’s hilarious because of its implied double meaning and by double meaning, I mean how it also applies to the stock market which has gone from bull market to perhaps a bear market. —
Two years ago, as most of you probably recall, I was so bullish on Tesla that I basically wanted to become “the Tesla fund”. TSLA was trading around $50 a share, and I thought the setup was perfect for the company and the coming EV revolution. Fast forward to today, where TSLA trades over $600 and is up more than 10-fold since we bought it even after pulling back 30% from its $900 high. The EV revolution is here and the stocks of the companies in that revolution reflect it (most of those have even reached bubblicious territory). I am scouring the globe and even the universe to find the next revolutionary markets to get in front of and I keep coming back to The Space Revolution and The Virtual Reality Revolution. So here’s what I’ve come up with as strategically the best risk/reward for the hedge fund and probably most individual investors to get in front of two of the next Trillion dollar market places. I’m calling it “Spacebook”. — being overweighted in Space stocks and Facebook.
Let’s start with Facebook. Holy cow, Facebook’s valuation is cheap. FB might be the cheapest stock in the market right now on some metrics. Facebook is trading at around 20x next year’s earnings estimates. They have been growing the topline at 20-25% per year. That is a lot for a company that did $86 billion in revenue last year. What’s most exciting about that growth number is that it doesn’t include any of the upside that Facebook is about to achieve in the burgeoning Virtual Reality market provided by their Oculus platform. As I wrote back in January, the Virtual Reality market is coming, and it’s coming soon. Facebook is going to be one of, if not the biggest winners in that market.
As I type this about Facebook, I can’t help but think back to two years ago (and 1200% ago) as I wrote to you about Tesla and I’m getting the same exact feelings about valuations and revolutions, etc.
To be clear, it’s not this current generation of Facebook’s Oculus virtual reality headset that is going to go mainstream, but it’s the next, lighter, even more advanced one and the versions thereafter. Facebook has a critical mass of developers as well as apps and games being developed for their platform already. The prior, first version of Oculus was like a late version iPod. The current one is the iPhone 1. The next one is going to be like when iPhone 3 went mainstream and the ubiquitous ad of the time was, “There’s an app for that.”
The Space Revolution. How many times do I have to talk about it? The technology has gotten to the point that it’s advanced enough and costs have gotten cheap enough that the whole thing is literally taking off. The Space Revolution is finally here. This is a private company’s dream come true. We are starting to see these private space companies begin to come public just as I was explaining they would be two years ago.
Over the next 20-30 years, there are so many applications that can come to fruition. Space factories, space tourism, space hotels, asteroid mining, supersonic transportation, new colonies, and the list goes on. If your time horizon is the next 2-3 years, I don’t know what to tell you. It might not happen in that period. But if you are like me and thinking about the next 10,000 days, then we have to get in front of this revolution. I’ve already started actually — like a year and a half ago, when we got into Virgin Galactic and two years ago when I bought SpaceX in the private markets for my hedge fund.
A lot of public technology companies are bubbled up right now. Space companies are likely included in that. We are probably paying 2-3x what these companies are probably really worth right now when they come public. However, we are making venture capital like investments in these companies with the potential to see 50-100x our investment over the next 10-20 years. I’m okay paying up a little for that kind of opportunity. If we compare this sector to the bubbled up electric vehicle revolution that is already here, I like the risk/reward of the coming Space Revolution much more right now compared to the EV market which has already had its huge run.
So how do we continue to invest in the Space Revolution? SpaceX is clearly the best company right now. If you’re wealthy enough, with a little work, you can find a way to make a private investment in the company. As you know, I’ve done that in the hedge fund. But, if you don’t have hundreds of thousands if not millions to throw at SpaceX, I think Rocket Lab symbol VACQ is the next best way to invest in space right now. As I sent out in the Trade Alert last week, I have begun to take a position in both the hedge fund and my personal account. It has come down some (like most space stocks and high growth tech over the last week) since my initial report and I have continued to add to the position. Another of my favorite public space companies to invest in continues to be Virgin Galactic, SPCE, which as you recall we got into in November 2019 around $8 per share. SPCE, just like all the other space companies, is probably a little overvalued at the moment. Especially with $0 revenue and not being able to get their test flights successfully into orbit. But again, we are looking up to 30 years down the road and this is currently my third favorite way to invest in the space revolution. Right now, I’m researching 4 or 5 other space companies that have recently come public. Stay tuned, as I dig into these further. I’ll pass along names if any are worthy of our investment. I’ve also made Facebook one of my largest positions again for the first time in a while.
As always when making an investment, I suggest that you give yourself room to add to the position if it does come down. Over the next six months to two years, I think we’ll have the opportunity to buy most small cap tech stocks at lower prices. On the flipside, I can’t guarantee that these positions will drop, which is why I have begun to build my positions in the space and virtual reality revolutions. And why I plan to continue to add to names in the Space Revolution if given the chance at lower prices.
In closing, that’s why I am basically becoming “the Spacebook Fund” right now and why you should begin to make yourselves Spacebook investors as well.
