Some of the most exciting research underway today is taking place in an area few have ever seen. It’s not Silicon Valley, El Segundo, or anywhere in the US. Nor is this research happening in Europe, China, or Japan.
It might be a cliché, but space is truly the final frontier. Companies in IT, manufacturing, pharmaceuticals, and defense are rushing to conduct experiments and build substances in the low Earth orbit occupied by the International Space Station.
It turns out there are lots of things you can do in space that are difficult to accomplish on Earth. A microgravity environment changes the way some materials behave, allowing them to be manipulated or combined to create unique compounds. The near vacuum of space aids in the creation of new materials, like this pharmaceutical crystal.
What’s happening today in space is due to several exciting technologies converging. This type of convergence can lead to rapid growth that’s hard (but not impossible) to predict. Between AI, automation, robotics, space, and quantum computing…we are starting to see amazing developments that could make millions of lives better. This is nonlinear progress.
Today, let’s take a look at a company sitting at the center of all these technologies. It’s a great example of the outsized potential and the volatility that often come with investing in companies on the edge of big breakthroughs.
Many of these types of small-cap companies follow a similar arc. They invest heavily in their namesake technology, operating in the red for years during their R&D phase. News announcements and earnings reports cause their shareholders to endure sharp sell-offs and sudden rallies.
When they reach a breakthrough stage of sustainable revenue generation, they can either grow organically or they can invest in strategic acquisitions to boost their offerings and growth potential.
This is exactly the setup behind one of our speculative positions in the Macro Advantage portfolio.
Redwire Corp. (RDW) is a critical business in space and defense infrastructure. It makes star trackers, solar arrays, cameras, power generation systems, payloads, antennas, and propulsion systems.
If you’re planning a mission to space, odds are you will use Redwire’s technology in some fashion, be it hardware (satellites and deployable structures) or software, like mission simulation and modeling.
There are few companies out there that sit in as many emerging technology niches as Redwire. The company is looking to become the go-to source of any space-tech solution. And it’s pivotal to future space projects—from learning how to farm plants in microgravity to designing new pharmaceuticals using “seed crystals.”
Importantly, Redwire provides multinational support for mission intel. It’s not beholden to any one government agency or commercial client. Any (allied) government could tap Redwire to build out its satellites and provide mission support.
As you’d expect, developing this technology comes at a high cost. The company’s latest earnings report disappointed the handful of Wall Street analysts covering the stock, with a big miss on earnings. Much of this loss, however, was due to the company’s recent buyout of a startup offering uncrewed surveillance aircraft space. The technology will only expand Redwire’s edge in the modern space race.
Redwire is an example of the types of companies we find through our thematic approach to markets. Redwire is on the small side of what we tend to look at in terms of market cap, which is why we recommended our readers take a small position and consider it a speculation. That means tolerating volatility.
In our view, weak hands have been flushed out of this stock. If you have a long-term view and see the potential (and risks) of investing in space infrastructure, RDW’s sell-off could be a buying opportunity:
Source: StockCharts.com
It’s a unique business that’s still under the radar. To be clear, a lot could go wrong here. The company is small, the sector is relatively new, and we are in a “tape bomb” environment where news out of DC can make or break your business. Despite our enthusiasm for the company, we consider it to be a speculation, to be clear.
That said, Redwire has a reasonable cash position to fund its future growth. The company’s current assets are 3.4X its liabilities, which shows Redwire’s management is taking on a sustainable amount of debt to fund expansion.
We’ve seen similar patterns to Redwire’s unfold in the markets over the past few years. Here’s a chart of Palantir Technologies (PLTR):
Source: StockCharts.com
And here’s Centrus Energy Corp. (LEU)…a stock we owned, but (ugh!) made the mistake of selling after the stock price took a tumble in February 2025:
Source: StockCharts.com
I was concerned about the reputational damage to our humble service. I didn’t follow my own process. Markets have a way of reminding you when you deviate from a proven path. As John would say, “sigh.”
And here’s one more chart, IonQ Inc. (IONQ), a stock we got right and continue to hold:
Source: StockCharts.com
Please note: None of this should be considered investment advice. Always do your own due diligence. Size your investments according to your risk tolerance. It is always a good idea to speak with your trusted financial advisor.
Thanks for reading.
Ed D’Agostino
Publisher & COO
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