May 10th, 2014
by Stephen Petranek , Daily Reckoning
Last week, before the markets opened, Orbital Sciences (NYSE: ORB) and Alliant Techsystems (NYSE:ATK) announced a merger. Both company's shares are up dramatically after the announcement.
That's unusual. Usually, the purchasing company takes a hit as the purchased company rises. The market seems to really like this deal. Alliant has announced it will spin off its mammoth ammunition business as part of the deal, splitting itself into two companies - bullets and aerospace. It's a groundbreaking opportunity for both companies.
Alliant is involved in almost every piece of space hardware the United States has built. It makes military and civilian rockets, manned spacecraft, space telescopes, satellites, parts of jetliners and more.
...a mass spec can...tell you exactly what's in anything, atom by atom.
The combination of the two companies means Orbital will have new rocket engines for its new Antares vehicle, which launches missions to the International Space Station. That's critical because Orbital has a limited supply of Russian engines from the 1970s it is using (which Congress is not happy about).
Alliant will bring manned spacecraft capabilities to Orbital, which means it may be able to leapfrog the ambitious efforts of SpaceX, which plans to turn its Dragon spacecraft, now carrying cargo to the International Space Station, into a manned platform in 2017, exactly when Alliant's new manned spacecraft will come online.
Meanwhile, Orbital will bring critical cost management to Alliant. Orbital excels at launching spacecraft for a fraction of what Alliant can do it for.
Elon Musk, who launched SpaceX and Tesla from nothing against all odds, has succeeded once again in creating disruption - this time in the space industry instead of automobiles. Alliant and Orbital would not be in this deal unless SpaceX had become a very scary competitor that can do just about anything in space for far less.
I became interested in the company Astrotech (NASDAQ:ASTC) when I wrote on the new era of private space companies in February, featured in Tomorrow in Review.
I'm especially fond of the company's division called 1st Detect, which has built a portable mass spectrometer.
The machines were developed during a contract with NASA, and now they're being commercialized. I cannot overemphasize what a breakthrough this is.
When I was in college, the "mass spec" in the physics lab that I used was the size of an office, was incredibly complicated and sucked up massive amounts of power. Astrotech's device weighs 12 pounds, is the size of a box of detergent and runs on a 12-volt battery.
Eureka! Here's what a mass spec can do: tell you exactly what's in anything, atom by atom.
A 1st Detect mass spec on the SOHO satellite studying the sun has told us that the solar wind isn't just cosmic rays and streams of electrons, protons and neutrons - it's neon, magnesium, carbon, silicon and iron.
Just about every science-based business or lab needs a small, portable mass spectrometer. Archaeologists need it to carbon-date rocks in the field.
Toothpaste companies need it to determine if Chinese manufacturers are adding toxic sweeteners to the product.
Fish wholesalers need it to determine if they've got contaminants in their catch. NOAA needs it to sample air quality in hundreds of locations.
Drug researchers in the Amazon need it to analyze biological samples on the spot.
Anesthesiologists need it to determine the health of a patient by analyzing what they are breathing out. Geologists need it to sample rock for oil precursors.
Heck, I want one to sample my own breath.
There are hundreds of markers in each human's outgassing that can reveal cancers and many other diseases long before they become overwhelming.
A few months ago Astrotech was heading for $4 a share, and then the tech decline took it to about $2.00 a share.
But people are catching on, and it has been swimming upstream in the downturn.
This is a tiny company that's about 25 years old and is comprised of several different divisions that also do satellite launch prep and develop vaccines in zero gravity on the International Space Station. ASTC is highly speculative, with a P/E around 55, but they are profitable, which is more than we can say for a lot of biotech companies that end up making a killing.
This stock is worth accumulating if you can tolerate some risk.
Warning: This is a speculative longer-term play (at least two years), and shares were selling for less than $1 not long ago.
Nevertheless, check out Astrotech (NASDAQ:ASTC).