Investing in the Final Frontier

Los Angeles financier Dennis Tito spent $20 million to visit space. But any investor can buy a stake in the high frontier for a lot less -- 51 cents, to be exact. That was the recent share price of a company called SpaceDev(SPDV Quote). The San Diego aerospace firm wants to launch commercially funded satellites to asteroids in order to survey and eventually harvest their mineral resources. It's a private-sector follow-up to NASA's NEAR probe, which successfully landed on the asteroid Eros in February.

Turns out vast mineral riches lie in the cold depths of space. Thousands of asteroids zip by on orbits that bring them close -- at times uncomfortably close -- to Earth. Just one asteroid with a width of roughly two kilometers could yield an estimated $6 trillion worth of platinum, $8 trillion worth of iron and nickel and $6 trillion worth of cobalt, according to John S. Lewis, who co-directs the Space Engineering Research Center at the University of Arizona, Tucson.

Truly astronomical figures to be sure. If you're wanting to invest in something even bigger than the Internet, space could be the place. It's a ground floor opportunity, in fact. Because so far the total size of the commercial space business -- about $96 billion yearly -- seems pretty down to earth. Still, commercial space expenditures already exceed the yearly outlays by governments, according to KPMG. And analysts project future growth at a healthy 20% annually.

An Expanding Universe

Much of that growth will likely be accounted for by large, highly diversified household name aerospace and defense firms like Lockheed Martin(LMT Quote) or General Dynamics(GD Quote).

Some have formed private partnerships. Take, for example, an outfit called Sea Launch. It's a joint venture between Boeing(BA Quote) and Norwegian maritime construction firm Kvaener, Russian aerospace firm RSC Energia and Ukrainian rocketry firm SDO Yuzhnoye/PO Yuzhmash. The partnership has already launched satellites from its floating platform, which docks in Southern California when not in use.

Smaller, pure-play commercial-space companies like SpaceDev are a little harder to find, though. Spacehab(SPAB Quote), for example, ships modules aboard NASA's Space Shuttle. Clients use these modules to perform experiments or transport cargo to the International Space Station. Orbital Sciences(ORB Quote) is involved in everything from launch vehicles to satellite imaging. Both stocks fell along with the tech sector and are presently trading modestly above their 52-week lows.

If you want to ferret out new commercial-space entrants when they emerge and keep tabs on what's happening in the business, check out the background articles and excellent news links at a Web site called HobbySpace. As you'll learn, the potential markets for future space products include everything from crystals that'll help run tomorrow's super-fast computers, to drugs customized for individuals, to advanced telecommunications.

Heavenly Hotels

Many of the companies with really out-of-this-world ideas remain private for the time being. Robert Bigelow, owner of Budget Suites of America, has reportedly committed $500 million toward a proposed lunar hotel and other commercial space ventures through a subsidiary he's formed called Bigelow Aerospace.

But Japanese construction giant Shimizu could beat him to the punch. Shimizu planners estimate the potential market for space tourism to be around $500 billion annually. And they've devised a business plan for a wagon-wheel-shaped orbital space hotel that has been designed down to the guest bathrooms.

The company figures 10 wealthy travelers per year would be willing to pony up $1 million each to follow Dennis Tito into orbit. If the price of a space vacation dropped to $25,000, the number of guests might rise to 30,000 annually.

Dramatic drops in the cost of transporting materials into space will be needed before $25,000 orbital vacations become anywhere near feasible, though. At present it costs as much as $10 million per ton to transport anything into space. That's why companies like Pioneer Rocket Plane and Kelly Space and Technology are competing with NASA to develop low-cost, reusable launch vehicles. Nevertheless, getting to the prototype stage likely will take years and billions of dollars.

Lunar Land Rovers

Which makes it clear why one commodity has long generated a profit in space: information. Whether in the form of weather data, a cell phone call or a pay-per-view movie, information's weightless.

A company called LunaCorp is building on that idea as a way to bring space exploration to the masses. The company wants to send robotic rovers to the moon and let theme park visitors actually drive them. The company figures it can also garner revenue from sponsorships and TV events. Who knows -- maybe one day we'll be watching live remote-controlled lunar motocross on our HDTV sets.

Like LunaCorp, SpaceDev also hopes to sell sponsorships for its future flights. And the company performs contract work. This month it announced the receipt of a $175,000 grant from the California Space Authority to study ways to lower space transportation costs. If contracts like these continue to pay the bills, someday you might find SpaceDev robots swarming over asteroids like grasshoppers, tirelessly chewing on their rocky surface to separate out the iron, palladium, sulfur and what-not, and then loading everything aboard vessels for shipment back to earth orbit. At that point, the materials could be used to build space hotels, research labs or lunar race tracks.

All in all, the materials on a two-kilometer-wide asteroid would be worth a mind-bending $300 quintillion, since that's what they'd cost if you had to ship them up into space at current prices.

Of course, it could be many, many years before SpaceDev or any company gains the wherewithal to bring those resources back from the depths of space and before a suitable market for that amount of material exists in earth orbit or on the moon. Even so, if the people at SpaceDev are right, a few 51-cent shares in your kids' portfolio might be the best investment you ever made.

Last Call for Warren Buffett

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