So you’re looking to start investing in the Drone industry. You’ve come to the right place.
If you’re just starting out with my blogs, please check my posts here and here before reading any further.
As a drone professional, U.S. patriot, and enthusiast for the technology, I have spent some time (actually, lots of time) researching how I might financially benefit from the industry’s overall growth. After all, the U.S. Government has taken several steps to encourage U.S. companies in this industry, and it is only natural to expect that a burgeoning industry will reap rewards for its investors.
Thus began my investing research. I started this quest using the same search engine you are probably using, and it retrieved three results:
– IVES (ETF)
– IFLY (ETF)
– S&P Kensho Drones (Index)
With the understanding of the industry that I have, I am saddened to say that none of these listings fully scratched my itch—they are not good indicators of the U.S. Drone industry.
– IVES was incepted in 2016. It started out as a fund dedicated to drones, but has since branched out to include its major holdings in overseas companies that deal with telecommunications. You have to scroll fairly far down the list to find the first company that plays primarily in the U.S. Drone industry.
– Similarly, IFLY began as a pure “Drone industry” play incepted in 2016. It consisted of approximately 50% U.S. companies, most of which had some level of investment in drones. Over time, its portfolio diversified to non-drone companies, and weighted itself more heavily to foreign companies.
– The S&P Kensho Drones Index is the closest I’ve found to what might be considered an American Drone Index, but I have two issues with it: (1) it focuses heavily upon the manufacturing side of the Drone Industry (which I described here), and (2) it includes several foreign companies that are profiting simply because of the relaxed foreign restrictions.
With this part of my journey complete, I determined that I would have to create my own index. This new index would include those companies in both the Supply and Operations segments of the Drone industry, to present a more accurate depiction of how the technology is spreading across the economy.
I used three criteria for my screen:
- The company must have a significant current or potential stake in the Drone industry, as either a Supplier or Operator.
- The company must be U.S. based, and publicly traded on a U.S. exchange.
- The company must not be listed as OTC.
As the inventor of a purely fictional index, I am free to choose any name I wish. Summoning all of my creativity, I give you:
DRONES: Paladin Automation U.S. Drone Market Index
Ticker Name Asset Allocation
AVAV AeroVironment, Inc. 9.01%
UAVS AgEagle Aerial Systems, Inc. 9.03%
KTOS Kratos Defense & Security Solutions 8.11%
WKHS Workhorse Group, Inc. 7.21%
LHX L3Harris Technologies, Inc. 6.31%
AMBA Ambarella, Inc. 5.41%
MRCY Mercury Systems Inc 5.41%
TXT Textron Inc. 5.41%
TRMB Trimble Inc. 4.50%
HEI Heico Corporation 3.60%
PLTR Palantir Technologies Inc. 3.60%
TDY Teledyne Technologies Inc. 2.70%
IIVI II-VI Incorporated 2.70%
GD General Dynamics Corporation 2.70%
VLDR Velodyne Lidar, Inc. 2.70%
CMTL Comtech Telecommunications Corp 1.80%
GPRO GoPro, Inc. 1.80%
GFF Griffon Corporation 1.80%
NOC Northrop Grumman Corporation 1.80%
JBL Jabil Inc. 1.80%
NVDA NVIDIA Corporation 1.80%
UPS United Parcel Service, Inc. 1.80%
FDX FedEx Corporation 1.80%
BA Boeing Company 0.90%
LMT Lockheed Martin Corporation 0.90%
HON Honeywell International Inc. 0.90%
RTX Raytheon Technologies Corporation 0.90%
INTC Intel Corporation 0.90%
AMZN Amazon.com, Inc. 0.90%
WMT Walmart Inc. 0.90%
GOOGL Alphabet Inc. 0.90%
Yield: 0.49% Beta (5Y Monthly): 1.67
DRONES is a weighted index of public U.S. companies with significant investment into unmanned aircraft technology. It is weighted by the percentage of each company’s operations tied to drones. These companies have the greatest growth potential from increased drone usage within the U.S.
The weighting criteria is somewhat subjective. I searched through multiple quarterly and annual reports hoping to find tables or pie charts of revenue and investments from these companies’ drone programs, but had no such luck. I even contacted the Investor Relations department of a few companies with probing questions, but the few responses did not provide much clarity. So, I applied a very coarse estimate of each company’s total operations that link to drones, and weighted them accordingly into asset allocation. As I spend more time analyzing specific companies, I’ll update the weighting values if I find useful information.
As I stated before, my intent is to track the overall development and maturation of the U.S. drone industry, on both the Supply and Operations side—in other words, those companies that derive financial value from drones.
Like any other index, DRONES can be valued as a weighted average of its component share prices. This graph is a 5 Year Monthly summary, which was generated in about 30 seconds by one of my automated investing research tools. As I add/remove tickers and change dates, I will generate an updated chart with one button. I could also schedule the task to run overnight, letting me wake up to an updated chart if I so desire. Automation is good.
As I was researching this portfolio, I identified several foreign drone companies that I will bring to your attention. Though I will not be adding them to this portfolio, I will list them here alphabetically for reference.
Foreign Market Leaders
AIR.PA Airbus SE
BA.L BAE Systems PLC
AM.PA Dassault Aviation SA
DFLYF DraganFly Inc
EH Ehang Holdings Ltd
ESLT Elbit Systems Ltd
HEXABN.MX Hexagon AB
IDR.MC Indra Sistemas SA
INTEQ Intelsat SA
LDO.MI Leonardo SPA
PARRO.PA Parrot SA
PLTRF Plymouth Rock Technologies Inc
QQ.L QinetiQ Group PLC
RHM.DE Rheinmetall AG
SAAB.B Saab AB
SNE Sony Corp
HO.PA Thales SA
There is a handful of companies that almost made the cut for adding to the portfolio, but I felt that their level of involvement in the Drone industry was not yet high enough to track in this index. I will revisit them from time to time, to see if their drone involvement grows to rank them among the industry leaders.
Honorable Mentions
T AT&T Inc
GSAT Globalstar Inc
IRDM Iridium Communications Inc
QCOM Qualcomm Inc
TMUS T-Mobile US Inc
VZ Verizon Communications Inc
VSAT Viasat Inc
GE General Electric Co
ENR Energizer Holdings Inc
ENS EnerSys
AGR Avangrid Inc
FSLR First Solar Inc
NEE NextEra Energy Inc
Why am I considering these companies? Let me explain.
- Telecommunications: Drones use radio frequency datalinks to communicate with the pilot, even during autonomous flight. The preponderance of commercial drones use line-of-sight (LOS) datalinks only, because federal regulations have mandated that all flights remain within visual line-of-sight of the pilot (or observer). As these regulations are relaxed, commercial entities will require datalinks to extend beyond visual line-of-sight (BVLOS). The two accessible methods to achieve this are with satellite-based communications, and mobile 4G/5G networks. Drone Industry Insights estimates an average 1,000,000 drone units sold per year for the next 5 years; I see this as 1,000,000 new subscriptions to a telecommunications service each year.
- Energy Storage: Drones use a variety of power sources, with batteries being the most common. Specifically, lithium-ion technology is the leading power source for commercial drones. 1,000,000 new drone units sold per year will be accompanied by some 3,000,000 new batteries sold. And since the drones are becoming allowed to fly longer, higher, farther, and heavier than in the past, they simply need more on-board power. It will take major production capacity, such as found in the producers of electric vehicle (EV) batteries, to meet this demand.
- Green Energy: The political and environmental landscape is shifting in favor of clean and renewable energy sources. Natural gas, solar power, and wind power are three dominant sources of clean and renewable energy. They also have another thing in common: miles upon miles of equipment (pipelines, arrays, and turbines) that need to be inspected on a regular basis. Those companies that thrive upon clean/renewable power generation will cut maintenance costs significantly through automated drone inspections and data processing.
This completes my initial coverage of the U.S. Drone industry. Future articles will take deeper dives into specific market segments and specific companies.
If you have ideas for additional companies to add to this index, please leave a comment. I will be happy to collaborate with my readers and crowd-source the research.
Remember to invest wisely, and consult a financial advisor prior to making any monetary decisions.
Paladin Automation LLC 
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