The Big Opportunity in the "Orbital Junkyard"

To say that I've been fascinated with space technology since I was a little kid is no exaggeration.

See, when I was in the first grade, I met none other than U.S. astronaut John Glenn, the first person to orbit Earth, and a man many will know about as an almost mythic figure in the book and movie The Right Stuff.

I got the honor of meeting America's hero because my dad, a Marine Corps officer, was escorting Glenn on a goodwill tour of our base.

Glenn would go on to become a distinguished U.S. senator and my dad later became the senior military editor of Aviation Week & Space Technology, the bible of the industry.

To this day, my dad and I still regularly discuss breakthroughs in military and space systems.

Just like this one...

So, you can imagine how excited I am as a tech investor to see the United States at the dawn of true commercial space travel, both for tourism and for industry.

It's that second item that I believe will hand investors outsize profits over the next few years. That's because we are starting to launch a new generation of advanced satellites.

In turn, these will be used for telecommunications such as broadband TV and Internet access.

And they will play a vital role in the Internet of Everything (IoE), a global system in which some 50 billion devices will communicate through the Web in just the next few years alone.

[Editor's Note: IoE is going to generate $7 trillion in new wealth - and we're going to get our share. It's a story Michael's following in his Strategic Tech Investor. You can subscribe by clicking here.]

Take the recent cargo flight by Space Exploration Technologies Corp. The company used its Falcon 9 rocket to launch six ORBCOMM Inc. (Nasdaq: ORBC) satellites for machine-to-machine communications that are a part of the IoE.

Though they haven't set a follow-up date, the two space leaders are already making plans to launch another 11 ORBCOMM satellites.

But as upbeat as I am about America's space leadership, I do see one major obstacle ahead...

Fact is, outer space has become something of giant floating junkyard of debris - much of it from damaged, dead satellites - that can rip space craft to shreds.

Scientists estimate that there are 21,000 pieces of wreckage the size of grapefruit or bigger, some as large as a school bus. Any piece of that debris could destroy a satellite or at the very least damage its expensive and sensitive gear.

But there's a big breakthrough on the horizon...

An Israeli start-up called Effective Space Solutions Ltd. has come up with a method of towing these satellites out of harm's way. The company is working to create a "DeOrbiter" Micro-satellite that can be thought of as tugboat for outer space.

Here's how the system works. The DeOrbiter starts by docking to a piece of space junk. It then essentially tugs it into a safe place in spaced known as the "graveyard orbit."

By clearing the debris, the process provides safe passage for all the new satellites that are regularly deployed, as well as the existing satellites currently used for telecommunications, surveillance, and defense purposes.

While Effective Space Solutions is not publicly traded, I've added it to my Space Tech Radar Screen. That way when the company does eventually go public, I'll be sure to let you know.

In the meantime, I want to talk to you about a way to profit from earth's giant space junkyard.

Ironically, this opportunity has essentially been "hiding" from tech investors because the company's technology in question has gotten very little attention from the mainstream media, despite recently receiving a nearly $1 billion U.S. defense contract.

The Junkyard Dog of Outer Space

The company I'm talking about is Lockheed Martin Corporation (NYSE: LMT). This is a firm that many investors have simply glossed over of late because the company is closely tied to the nation's defense program at a time of lean Pentagon budgets.

Indeed, Lockheed Martin may even strike some as "old school." The company's history dates back more than 100 years but the modern firm came together in a 1995 merger.

Today, this global giant is well known for making military aircraft as well as combat ships and ground vehicles. It also has deep expertise in biometrics, cyber security, and the booming field of cloud computing.

But it's the company's deep and vital understanding of advanced radar that is giving rise to a new investment opportunity.

Lockheed Martin recently scored a $914 million federal contract for a sophisticated piece of technology known as the Space Fence.

I believe this is a very important program because the Space Fence will essentially replace the Air Force Space Surveillance System (AFSSS). If you ask me, the AFSSS itself belongs in a junk yard - we've been using the thing for the last half century.

The Space Fence is basically an S-Band radar that makes it possible to track a huge number of objects floating in space. We're talking the ability to identify and track some 200,000 objects the approximate size of a baseball, according to data supplied by the U.S. Air Force.

Furthermore, the platform will be able to make 1.5 million observations each day. That's roughly 10 times the capacity of previous technology such as the AFSSS. The Space Fence system is expected to reach operational capability in 2017.

Truth be told, this technology is going to mesh nicely with Lockheed Martin's other operations, which include space exploration and satellite systems.

A Dividend Growth Story

As innovative as the Space Fence is, that's just one reason to consider investing in this storied aerospace and defense contractor. Another is the company's strong financial performance in the face of a challenging defense environment post-Iraq.

With a market cap of $55 billion, Lockheed Martin trades at roughly $175 a share. It has operating margins of 11% and a return on equity of a stunning 125%.

It trades at 14.5 times forward earnings, a nearly 15% discount from the S&P 500. It also pays a dividend with a respectable forward yield of 3.2%.

History shows that yield is very likely to increase - the company has upped the payout 10 times in the past decade.

And there's always the upside of price appreciation. Not counting the dividend, the stock has returned nearly 90% to investors, or more than double the S&P's 40% advance during the period.

Thus, Lockheed Martin has a lot to offer investors - cutting-edge tech, excellent financials, and nearly $1 billion in fresh revenues from the dawn of commercial space.

And with so much momentum behind it, Lockheed Martin looks to continue its string of market-beating gains for the long haul.

About the Author

Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...

  • He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
  • He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
  • As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.

This all means the entire world is constantly seeking Michael's insight.

In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.

Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.

And even with decades of experience, Michael believes there has never been a moment in time quite like this.

Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.

To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.

His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.

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