While 2020 was the year of the electric vehicle, investors may be wondering what stock trends may take place this year. In my opinion, one trend that could certainly be a contender is space stocks. According to venture capital firm Space Capital, 2020 was the largest year on record for space infrastructure investment. In addition, NASA awarded more than $370 million in fixed-price contracts to 14 companies to develop space technologies.

The industry is certainly heating up as ETF manager Ark Investment Management announced plans to launch a space ETF. The company is already well known for its ARK Innovation ETF (ARKK) that returned 170% last year. The new actively managed ETF will be called the ARK Space Exploration ETF (ARKX) and will invest in U.S. and global companies engaged in space exploration and innovation.

There already is an ETF that tracks space stocks, called the Procure Space ETF (UFO). The ETF is up 6.2% this year, compared to a 1.1% gain for the S&P 500. Many of the companies in the UFO ETF are not only likely to be added to the new Ark ETF but could also shine this year as the space industry gets more recognition from investors. That’s why I am highlighting Honeywell International Inc. (HON), Iridium Communications Inc (IRDM), and Trimble Inc. (TRMB) below.

Honeywell International Inc. (HON)

HON has been around since 1885 when it produced the predecessor to the modern thermostat. Since then, the company has emerged into a sprawling conglomerate with operations that span the globe. Today, it operates through four business segments–aerospace, building technologies, performance materials and technologies, and safety and productivity solutions.

Its aerospace segment is a leading global provider of integrated avionics, engines, systems and service solutions for aircraft manufacturers, airlines, business and general aviation, military, space, and airport operations. In the third quarter of 2020, its defense and space business reported double-digit sales growth year-over-year.

A recovery in the business aviation aftermarket should also aid growth in the aerospace segment. HON should benefit from robust product offerings and opportunities in the Unmanned Aerial System (UAS) and Urban Air Mobility (UAM) markets. For instance, the company launched SATCOM, the smallest and lightest satellite communication system for unmanned aerial vehicles, last year.

The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” for Trade Grade, and Buy & Hold Grade, and a “B” for Industry Rank. Those are three out of the four components that make up the POWR Ratings. HON is also the #1 ranked stock in the Industrial – Manufacturing industry.

Iridium Communications Inc (IRDM)

IRDM is a U.S. based company that offers voice and data communications services and products to businesses, U.S. and international government agencies, and other customers on a global basis. It provides mobile voice and data communications services through a constellation of low earth-orbiting satellites.

The company operates the world’s largest commercial constellation with a mesh architecture of 66 operational Low-Earth Orbit satellites to route traffic using radio frequency crosslinks. As it’s the sole provider of a mobile voice and data satellite communications network, it benefits from a highly profitable recurring service revenue base.

IRDM’s commercial business is the primary driver of its long-term growth. It serves a diversified customer base that forms an essential component of its communications and business infrastructure. It also provides mission-critical communications and maintenance services to the military branches of the U.S. Department of Defense.

The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade. It is also the #8 ranked stock in the Air/Defense Services industry.

Trimble Inc. (TRMB)

TRBM provides location-based solutions used in global positioning systems (GPS), laser, optical and inertial technologies. Its product portfolio includes 3D laser scanning, flow and application control systems, monitoring systems, water management, and navigation infrastructure. It also manufactures laser and optics-based products and GPS products.

The company is one of the dominant players in the GPS market. Its GPS solutions lead to operational efficiency for its customers, which is why it sees demand for these solutions rising. TRBM is also focused on its software and services portfolio, as its revenues from this segment have been growing rapidly as of late.

TRMB has pivoted from hardware-driven point solutions to software, which should remain a tailwind for the foreseeable future. The company has made software and services an essential part of its growth strategy. It also has a strong merger and acquisition strategy. The company has made numerous acquisitions to complement its current business portfolio and capabilities.

The stock is rated a “Strong Buy” in our POWR Ratings system. It holds a grade of “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and a “B” for Industry Rank. The stock is also ranked #5 in the Software-Application industry.

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HON shares rose $0.61 (+0.30%) in premarket trading Wednesday. Year-to-date, HON has declined -2.79%, versus a 1.74% rise in the benchmark S&P 500 index during the same period.

About the Author: David Cohne

David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...

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