Michael Robinson writes: The mainstream media was all over Microsoft Corp. (Nasdaq: MSFT) co-founder Paul Allen's recent announcement proclaiming he intends to "transform" the space industry.
But they missed the real story - one that will make a few savvy investors a small fortune.
If you want big profits from the next generation of space travel, keep an eye on new developments at a small but highly respected research arm of the Pentagon.
It's the agency that brought you the Internet. And now it wants to create a whole "new space system."
Don't get me wrong. I believe Allen's investment is an important vote of confidence in for-profit space travel.
But hold on to your wallets folks, because I'd be surprised if he or any investors ever turn a profit from Allen's new venture.
In reality, the story played to America's obsession with celebrities: Famous billionaire says he'll invest up to $200 million in new hybrid space crafts that will launch satellites for industry and government.
After reading about Allen's foray into outer space you might have been tempted to jump into some obvious industry stocks.
Orbital Sciences Corp. (NYSE: ORB) boasts some exciting technology. But for now, steer clear of the stock.
Its fortunes still rest too heavily on NASA, which because of budget restraints axed a planned return to the moon.
The so-called Wall Street "pros" may tell you to buy shares of Lockheed Martin Corp. (NYSE: LMT), a big-cap concern that spans the defense-space spectrum.
But other divisions of the Pentagon are cutting back, which means Lockheed will face cash flow challenges for at least the next two years.
So let me tell you what's really going on - I believe a recent announcement by an innovative arm of the Pentagon will become an investment bonanza.
It didn't get much play in the major media because it's hard to see the profit potential in recycling dead satellites still orbiting earth.
Enter the Defense Advanced Research Projects Agency, widely known as DARPA. Under its Phoenix program, the agency wants to find ways to harvest parts from old satellites.
To do so, DARPA intends to transform the nation's space system. I have followed this field for years and I firmly believe DARPA's interest will help lay the foundation for a whole new era of space travel.
No doubt, other federal agencies want in on the action. The Federal Aviation Administration (FAA) recently filed a 94-page report projecting commercial space flights through 2020.
And U.S. President Barack Obama wants NASA to pursue robotic technology and to land spacecraft on asteroids.
But pay attention to DARPA. It has a way of taking high tech to the next level, leaving behind a trail of profits.
Nearly 50 years ago, it started a little computer project to link science labs. Who could have predicted how far that would take us?
Now you can surf the web from your smart phone, courtesy of DARPA.
More recently, it had a huge impact on nanotech, robotics, and unmanned aerial vehicles.
A DARPA-backed nano hummingbird equipped with surveillance video recently made TIME magazine's list of the top 50 inventions of 2011.
To pull off the feat, DARPA worked with AeroVironment Inc. (NASDAQ: AVAV), a tech leader that makes small military drones.
So, we're looking for the next AeroVironment. Trust me. It's out there, and I'll find it once DARPA starts writing new contracts. You'll be the first to know when that happens.
Clearly, the right companies will understand DARPA's goals. The agency wants to recycle many of the 100 satellites orbiting 22,000 miles above earth.
Here's the incentive: Those satellites are worth $300 billion.
To remove antennas and other hardware, DARPA will employ advanced robotics and nano satellites that talk to each other.
Under the plan, a giant satellite called a "tender" would orbit earth as a 21st century service station.
Of course, the DARPA team will need to create unique space tools, so the agency wants to improve on a wide range of key technology. That includes underwater imaging, computerized medical robots, and wireless control systems.
All these tech breakthroughs will yield lots of great investment opportunities.
I predict that in the near future, DARPA will help link robotics, space communications, and artificial intelligence in profoundly important ways.
And talk about "outsourcing." I think it's inevitable we'll have robots building other robots and even constructing entire space stations while orbiting earth.
They'll send drilling bots to asteroids and other planets to mine key resources.
And eventually, self-replicating space stations will result in a constellation of machine-run satellite "cities" floating through the heavens.
So, despite the nation's budget battles, the Pentagon will nonetheless play a major role in the "Era of Radical Change."
[Bio Note: A Pulitzer-Prize nominee and published author, Michael Robinson is a journalist, investing expert and high-tech visionary with more than 30 years of experience. A veteran stock-picker, Robinson is best-known for selecting a group of tech-related rare earth stocks that had cumulative profits of 250% in just 16 months. During his time in the Silicon Valley region, Robinson has also profiled defense companies for Defense Media Network and Signal Magazine. His other articles have appeared in The New York Times, American Enterprise, National Real Estate Investor and The Wall Street Journal. In this new Money Morning feature "The Era of Radical Change," Robinson will introduce readers to over-the-horizon investment opportunities.]
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