Happy Birthday, America! You make 250 look good.
One of my New Years resolutions was to be more attentive to this blog. While I can’t say that I have been successful in that endeavor, I can say that I have been improving my skills in automated data wrangling and analysis, stock analysis, and getting a deeper insider’s perspective into the U.S. Drone Industry. My hope is that this upskilling will also upgrade my work to help you, the retail or institutional investor, make more informed decisions when investing in U.S. drone companies.
The U.S. Drone Industry landscape is changing faster than I have been able to keep up, even at a high level. As I often do, I spent some time updating the companies in our DRONES Index and rebalancing their relative “conviction level” of drone technology (or at least investor sentiment attributed to drone technology). As a reminder, this is a highly subjective assessment, and I invite reader feedback.
Here is the updated list and weighting of U.S. drone companies in the DRONES Index.
| Ticker | Conviction | Weighting |
| AVAV | 100% | 7.4% |
| UAVS | 100% | 7.4% |
| RCAT | 100% | 7.4% |
| SWMR | 100% | 7.4% |
| ONDS | 90% | 6.6% |
| AIRO | 90% | 6.6% |
| UMAC | 80% | 5.9% |
| KTOS | 70% | 5.1% |
| OUST | 60% | 4.4% |
| PDYN | 50% | 3.7% |
| AMBA | 40% | 2.9% |
| MRCY | 40% | 2.9% |
| TRMB | 30% | 2.2% |
| TDY | 30% | 2.2% |
| COHR | 30% | 2.2% |
| JOBY | 20% | 1.5% |
| HEI | 20% | 1.5% |
| CMTL | 20% | 1.5% |
| GPRO | 20% | 1.5% |
| GFF | 20% | 1.5% |
| NOC | 20% | 1.5% |
| JBL | 20% | 1.5% |
| NVDA | 20% | 1.5% |
| BA | 20% | 1.5% |
| LMT | 20% | 1.5% |
| SPAI | 20% | 1.5% |
| PLTR | 10% | 0.7% |
| BBAI | 10% | 0.7% |
| LHX | 10% | 0.7% |
| TXT | 10% | 0.7% |
| GD | 10% | 0.7% |
| HON | 10% | 0.7% |
| RTX | 10% | 0.7% |
| INTC | 10% | 0.7% |
| WMT | 10% | 0.7% |
| QCOM | 10% | 0.7% |
| GOOG | 5% | 0.4% |
| UPS | 5% | 0.4% |
| FDX | 5% | 0.4% |
| GE | 5% | 0.4% |
| AMZN | 5% | 0.4% |
| SYM | 5% | 0.4% |
Here is how the relative price history looks over a 10-year timespan.
The stock price history alone is demonstrating a Compound Annual Growth Rate (CAGR) of over 21%! Some of these stocks are also dividend yielders, pushing the total profitability closer to 23% annualized returns over the period. When adjusting for the high volatility inherent in many of these stocks (estimated at beta=2.0), we approximate alpha=5.5%.
Are these stocks a Buy? Well…as I often state in my Company Spotlight articles, the stock price in this category is often propped by investor sentiment, not fundamental performance. At the time of writing, the U.S. Drone Industry is simultaneously supporting drone-heavy warfare in no fewer than three combat theaters (Ukraine, Israel, and Iran). While this condition is certainly providing temporary revenue augmentation and investor enthusiasm, it is an unsustainable situation that I sincerely hope will not last much longer. In a “non-wartime” economic environment, many of these companies are simply not profitable. For that matter, in this “wartime” economic environment, many of them are still not profitable; however, the cycle of “reverse-split and dilute” remains a common fundraising tactic.
I hope to return before the end of summer with more Company Spotlights into those stocks that I feel have an interesting story or a high conviction level. Until then, please consult qualified investment professionals and do your own due diligence prior to making an investment decision.
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