Looking to the cosmos for opportunity

Space exploration is no longer the stuff of science fiction; it's a rapidly evolving industry that's reshaping the way we think about technology, defense and connectivity, says Fidelity's Chris Lin.

• The space industry is lifting off and becoming increasingly strategic, with its influence bolstering missions such as interplanetary exploration, providing internet access to remote, untapped corners of the globe, and military surveillance and defense, according to Fidelity Portfolio Manager Chris Lin, who believes Space Exploration Technologies is best-positioned for a potentially smooth takeoff and bright future.
• This trailblazing company, also known as SpaceX, is the market leader in launching rockets cost-effectively, largely due to its proven expertise in reusability, according to Lin, who manages Fidelity Advisor^® OTC Fund.
• In helming the fund since 2017, Lin invests primarily in dynamic growth companies listed on the Nasdaq stock exchange. In particular, he favors firms with above-average earnings-growth potential and a sustainable business model, for which the market has mispriced the rate and/or durability of growth.
• Lin points out that in 2024 alone, SpaceX — which makes money primarily by charging a fee to other companies and governments for payloads carried into space — accounted for about half of the world's orbital launches, establishing its global dominance.
• And the company's ambition stretches far beyond Earth's orbit, he explains. For example, in January SpaceX launched its Falcon 9 rocket carrying two lunar landers to the moon, a bold yet vital early step toward the exploration of other planets, according to Lin.
• Moreover, he says the company is testing a huge, heavy-lift rocket dubbed Starship that he believes could potentially fulfill the long-sought mission of sending people to Mars.
• "Closer to home, advancements in satellite technology have transformed global connectivity," Lin states. "SpaceX's low earth orbit Starlink satellites are creating a web of internet access to previously underserved communities in rural and remote areas."
• Lin notes that a scarcity of investment choices in space exploration makes it challenging for him to capitalize on this emerging segment, beyond SpaceX, a privately held company within the portfolio (as of April 30) and in his view the clear frontrunner.
• OTC has benefited from participating in several of the firm's private offerings the past few years, with valuations supported by the increase in successful flights and lower costs per unit of payload weight, along with the Starship and Starlink initiatives.
• Lin says the strategy has a history of successfully investing in select private companies, working closely with Fidelity's global research team to focus on the firms he finds most interesting and mispriced relative to their long-term earnings potential. He sees it as an opportunity to buy into promising businesses that are generating durable growth. "It's also a chance to get close to the company and build a strong relationship that will hopefully last many years," he adds.
• SpaceX isn't the only player in this arena, says Lin. Rocket Lab, a publicly traded company the fund doesn't hold at the end of April, is a business he considers worth watching, even though its rockets currently cater to smaller payloads. The firm's potential for growth could make it a rising star in the industry, according to Lin.
• "The sky is no longer the limit," Lin concludes. "The space industry is continually pushing the boundaries of what's possible and, in the process, shaping the future of space, technology and connectivity, making it an exciting time to be an investor."