Billionaire Elon Musk’s SpaceX is booming! This UK stock offers a way to invest

SpaceX recently sent the world’s most powerful rocket into orbit, then back again. Here’s one UK stock to consider buying to climb aboard.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As well as Tesla, Elon Musk is also CEO of SpaceX. Unfortunately, the space exploration firm isn’t publicly listed, which means I can’t invest in it. However, there’s a UK stock that enables me to do so indirectly.

This is Baillie Gifford US Growth Trust (LSE: USA), the investment trust in the FTSE 250. Here’s why it’s worth considering.

Firing on all cylinders

First though, what’s so special about this maverick rocket company? Well, consulting firm McKinsey reckons the global space economy will be worth $1.8trn by 2035, up from $630bn in 2023. So the market opportunity for SpaceX is extremely large.

Next, the company’s a pioneer in reusable rockets. These lower launch costs hand it a massive advantage and enable many more missions.

In fact, as of 8 June, SpaceX had launched 62 rockets this year. It’s aiming for 148 launches, which would represent a significant rise on last year’s 98. That would be one every two and a half days!

Then there’s Starlink, its satellite internet constellation business. It aims to provide high-speed internet access across the globe by deploying as many as 42,000 satellites into orbit. SpaceX’s Falcon 9 rockets have taken more than 6,000 up there so far.

Reports say Starlink’s on track to generate $6.6bn in revenue this year, up from basically nothing four years ago. It may even generate $600m in positive free cash flow, which is encouraging at such an early stage.

The firm also just struck a deal with internet provider Comcast to supply Starlink access to its enterprise customers. So more growth seems certain.

Lastly, there’s Starship, the company’s 37-storey rocket that’s just had its first successful test flight. If SpaceX can get this beast up and down regularly, then that would be a game-changer for space tourism, larger payloads (including Starlink satellites), permanent Moon bases, and more.

However, its founding mission to colonise Mars isn’t going to happen anytime soon.

Why this FTSE 250 trust?

Fortuantely, SpaceX isn’t short of capital, which means it gets to pick its own investors. It chose Baillie Gifford in 2018 because it had been a patient and long-time backer of Tesla.

Today, the US Growth Trust has SpaceX as its top holding, representing 7.6% of the portfolio. That’s a significant position.

However, there are many other exciting stocks in the portfolio, including unlisted ones. One is Stripe, the internet payments company that surpassed $1trn in total payment volume in 2023. Another is artificial intelligence (AI) juggernaut Nvidia.

Top five holdings (as of 31 May)

Weighting (%)
The Trade Desk5.0%

Now I should mention risks. The trust invests solely in US-listed growth stocks so if those fall out of favour, as happened in 2022, the share price would likely suffer.

In fact, performance has been a concern here. The trust’s five-year net asset return of 72% is notably lower than the S&P 500 (106%).

Additionally, SpaceX could encounter technical setbacks and delays, hurting valuation.

That said, I think this FTSE 250 stock’s set up to do well over the next five years as interest rates fall and the initial public offering (IPO) market reopens.

SpaceX is reportedly considering a huge Starlink IPO at some point. That could be a big boost to the trust’s value.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ben McPoland has positions in Tesla and The Trade Desk. The Motley Fool UK has recommended Amazon, Nvidia, Tesla, and The Trade Desk. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

2 of the best US growth and dividend stocks to consider!

These heavyweight US stocks have been delivering tasty investor returns for decades. Here's why they could remain great picks for…

Read more »

Investing Articles

I reckon these 2 penny shares are hidden gems worth a closer look!

Some penny shares are well-known, whereas many others go under the radar, but that doesn’t necessarily mean they aren’t potentially…

Read more »

Investing Articles

Just released: our 3 best dividend-focused stocks to buy before August [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Down 36% and yielding 7.8%, is this FTSE 250 share a bargain?

Christopher Ruane looks at a FTSE 250 share with a sizeable dividend yield and a recent record of dividend growth.…

Read more »

Investing Articles

Is Barclays one of the FTSE 100’s best bargain stocks?

Right now, Barclays' shares are cheaper than those of FTSE 100 rival stocks Lloyds and NatWest. So should I buy…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Is a takeover offer about to boost the Rentokil stock price, and should I buy?

The Rentokil share price is up 10% on takeover rumours. Is it a stock to buy or one to be…

Read more »

Investing Articles

Here’s my Rolls-Royce dividend forecast for 2024-27!

Our writer considers whether the Rolls-Royce dividend might be reinstated in coming years, based on financial performance and stated payout…

Read more »