On 5 September last year, I posted an article here on The Motley Fool titled, “Up 81% in 2025 — should I buy this UK tech stock before it enters the FTSE 250?” The tech stock in question is Filtronic (LSE: FTC).
The exciting communications manufacturer had just signed a deal with SpaceX to supply equipment for the firm’s rockets. The stock was surging. The growth story looked compelling. I took the plunge and opened a position. What has happened since? It looks like I made a pretty good decision…
Double up
In the eight months since that article, the Filtronic share price has doubled in value – up 120% at its peak, although it has retreated a touch since then. The market cap has soared to £651m, now larger than a couple of dozen FTSE 250 companies (it may join the index in the near future). A £10,000 stake is now worth £20,175.
All the while, I got a decisive answer to the opening question – yes, yes I should have bought that UK tech stock!
A share price doubling in less than a year is a pretty rare event. So what happened? In short, we can call it the ‘SpaceX effect’.
Filtronic works closely with SpaceX, receiving two massive orders in the last year alone. The American giant also holds something like 10% of the equity in the British firm – a sign that this is a partnership that is here for the long run.
What has been lifting up both companies is the hype around the nascent ‘space industry’ and the upcoming blockbuster IPO. When SpaceX has a public offering later this year, it is expected to be valued at $2trn or thereabouts.
While the 100% gain has been nice to watch rising in my portfolio, I will say that us longtime investors know that there will always be winners and losers. I was not looking to double up as quickly as possible and sell. I’m interested in investing in great companies that can be financially rewarding over decades. And with that in mind, I think Filtronic could still be a good buy today…
Is it a buy today?
Much of the potential with Filtronic is tied up in the success of the space industry at large. We have seen applications for taking things to orbit already such as Starlink. And BAE Systems has just released a new spacecraft for space defence too. If the use cases continue to grow then the valuable technology Filtronic provides could as well.
The risks are that this is a new industry and valuations are sky high. Filtronic now has a price-to-earnings ratio of 71 – making it one of the most expensive stocks on that metric across the whole FTSE 350. To take another example, SpaceX is aiming for a market cap of $2trn with a purported revenue of $16bn and earnings of $8bn. Pricey stuff.
My view? I’m not focusing on a time period as short as the past eight months. I think the company makes good products that are needed in a growing industry. I like its prospects over the long term and think it’s worth considering today.
