The Market Sector Most Likely to Benefit From a Trump Presidency
There is one theme that is quite clear — and there's a good way to play it.
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The market action is positive on the first trading day of the Trump administration but there is some selling into strength taking place. The indexes are green, with the Russell 2000 IWM small-cap index leading while the Magnificent Seven MAGS is struggling with a decline of about 0.5%. Overall breadth is quite good due to the small-cap strength, with around 7,000 stocks advancing and 2,200 declining. There are 315 new 12-month highs.
Market participants are weighing how Trump's policies are going to impact the stock market. There are still many unknowns, especially tariffs, but there is one theme that is quite clear. In his inaugural address, Trump stated, "We will pursue our manifest destiny into the stars, launching American astronauts to plant the stars and stripes on the planet Mars."
The close relationship of Elon Musk to the Trump administration adds extra weight to this promise. He celebrated wildly when Trump made this promise.
There are a number of space stocks benefiting from this theme. Rocket Lab USA RKLB, Intuitive Machines LUNR, Spire Global SPIR, and AST SpaceMobile ASTS are a few, but I wanted to highlight Redwire RDW, which just announced an interesting merger this weekend.
Redwire describes itself as "a global space infrastructure and innovation company enabling civil, commercial, and national security programs. Redwire's proven and reliable capabilities include avionics, sensors, power solutions, critical structures, mechanisms, radio frequency systems, platforms, missions, and microgravity payloads."
The company is involved in a wide variety of space-related technology. One example is that it has successfully shown that small-molecule drug crystals can be grown in orbit using its proprietary system. These are larger and more structured than crystals grown on Earth. The space-grown crystals can be used as templates or seeds to grow similar crystals on Earth. These crystals are used in medicine and materials science. This is just one example of the many programs that Redwire is involved in.
Redwire has been growing quickly through acquisition. Its tenth acquisition with Hera Systems took place in September. Hera has "expertise in specialized missions for national security space customers and unique technical achievements with a path to transformative capabilities in the emerging area of dynamic space operations."
On January 20, RDW announced its largest deal to date with Edge Autonomy. Edge designs and manufactures uncrewed technology systems used for long-range reconnaissance, intelligence gathering, and aerial surveillance
This deal nearly doubles the market cap of Redwire and expands its space offering to national defense. It opens up the potential for dramatic growth at exactly the time when demand for these services is expanding.
The company is not profitable at this point, but Redwire, as a combined company with Edge, is forecasting full-year revenues of $535 million - $605 million and adjusted EBITDA of $70 million - $105 million with positive free cash flow, assuming the transaction had been consummated on January 1, 2025.
Technically, Redwire stock had a very strong run in 2024 and pulled back to its 50-day simple moving average last week. It is gapping up on the Edge acquisition deal, but I'm expecting an opportunity for entries on pullbacks.
The company is in the right sector at the right time and is making aggressive moves to expand its offerings to both space and national security.
I believe that space exploration will be an enduring theme in the next few years, and Redwire is a good way to play it.
At the time of publication, Rev Shark was long RDW, SPIR, ASTS, LUNR and RKLB.
