When people hear the word "drone" (which properly named UAV, Unmanned Aerial Vehicle) they usually think of unmanned military aircrafts used in war areas. But this has changed after Jeff Bezos, CEO at Amazon (AMZN), in 2013 said that they want to deliver packages via drones already in 2015. The public then began to open their eyes to the commercial drone market that will occur. I will tell you about companies that will benefit from the many applications and markets that are about to be created. Drones will continually take more and bigger roles in our society every year, eventually they will be a part of your everyday life. It can be difficult to speculate in tech companies in the short-term, but it's easier in the long-term. It's important to always try to think ahead so that when the market realizes some technological changes, you are already well-read and prepared yourself on how to invest. In the future will drones do everything from delivering food and e-commerce to security and above all help farmers manage their crops.
Which companies should you invest in that will benefit from the drone revolution?
The global aerial drone market for defense is today around $7 billion and is expected to increase well into the future. On the other hand is the commercial market today not even $1 billion, we are at the beginning of this huge change in our society. Humans have very easy to underestimate things so this development could go a lot faster than expected. But there are several problems that can arise with the drones. The Electronic Frontier Foundation is worried about drones as an invasion of privacy, the ACLU (American Civil Liberties Union) is worried about them as death robot and the government is worried about their criminal usage. These dangers seen with drones will probably do so regulations take longer time, but the industry is moving faster than regulations can keep up. The FAA (Federal Aviation Administration) who is a regulator in the US is now working under a deadline of September 2015 to develop regulations for drones. They plan to start with limited flights of small drones weighing 25 kg or less. This would permit so that the majority of all packages can be supplied with drones. Amazon says that their goal is to get the goods in the customers hand in 30 minutes or less and that their drones will be able to carry packages weighing up to 2.26 kg, it would account for 86% of all sold products from their site. The German company, Deutsche Post DHL (DPW.DE) and Alibaba (BABA) have also tested small packet delivery using quadcopter drones.
Analyst at Teal Group did a market study in 2013 estimated that spending on drones will rise to incredible $89 billion in the next ten years. It also predicted that the US will account for 65% of the worldwide RDT&E (Research, Development, Test & Evaluation) spending on the technology over the next decade. This technology will increase efficiency and allow for an exponential growth increase, furthermore it will be able to do things that humans can't do. In other words will they do difficult and dangerous jobs that can save human lives. According to a study by the Department of Transportation, there will be almost 250,000 military and civilian drones in the US by 2035. NASA is currently building an air traffic control systems for drones and Google (GOOG) carries lobbying for drones, so there's a lot happening in the US. The drone industry needs major companies like Google who can afford to operate lobbying, if Google can lobby Congress and states to let people ride in driverless cars, I have no doubt that they can persuade people in power that they also can make drones safe. The development of drones has in recent years begun to rise exponentially, you can see this clearly at CES 2015, where drones now have their own section. I have previously mentioned a drone (Airdog, a drone that automatically tracks your movements so it can follow you everywhere) and the most amazing products this year from CES 2015. You can read the post here: CES 2015: Amazing Products You Must See
A service I use every day is TradingView and it has become essential for anyone who trades on the market. TradingView has all charting tools you need to share and view trading ideas. It's easy and intuitive for beginners, and powerful enough for advanced chartists. Real-time data and browser-based charts let you do your research from anywhere, check it out here.
But which companies should you invest in that will benefit from the drone revolution? There is a variety of companies engaged in drones, everyone wants a piece of this huge market that is being created. Obviously you will find the big tech companies such as Google, Facebook (FB) and Amazon which I mentioned earlier. Last year, Google bought a small drone company based in New Mexico, Titanium Aerospace. The company manufacture solar-powered drones that can fly nonstop for years, they want to use drones to expand the Internet's reach to parts of the earth where it's not yet available. According to sources, had Facebook also tried to buy Titan Aerospace, but they acquired another company that makes solar-powered drones, Ascenta. It's hard to find companies to invest in that only makes drones. AeroVironment (AVAV) is one of the few pure drone companies, today they mainly manufacture military drones but I believe that they are well-positioned for the commercial market. A similar but smaller company is CybAero (CBA.ST) in Sweden. And recently was Intuitive Aerial (INTU.ST) listed in Sweden, they manufacture drones for customers in film and broadcast. I have written a post about them here: Intuitive Aerial Shares Rise 10% in First Trading Day
Another strategy is to invest in companies that supply the drone producers with necessary things.
Another drone company is Parrot SA (PARRO.PA) who is based in Paris, France. They sell to consumers and are popular among hobbyists and hackers. GoPro (GPRO) that develops, manufactures and markets high-definition cameras also seems to have plans to make drones. Then we have the large well-established companies that sell military drones for the defense. Here you will find Boeing (BA), Lockheed Martin (LMT), Northrop Grumman (NOC) and Elbit Systems (ESLT) which is a smaller company but through mergers and acquisitions own 90% of Israel's non-state-owned defense sector and they is a major player in the global drone market. But if you are thinking of investing in one of these companies, I think you should first check out Raytheon Company (RTN) because they manufacture commercial electronics systems as several military drones manufacturers use. The question is whether these military companies will get a share of the commercial market that we want to invest in. Another strategy is to invest in companies that supply the drone producers with necessary things.
We will need to ensure that all drones can communicate with each other, here we may see that Cisco (CSCO) will play a big role. Then will probably Intel (INTC) earn some money on all the drones because they will require lots of chips, lots of processing power and lots of memory. The drones will also need cameras, Ambarella (AMBA) is a company that makes chipsets and software that record and transmit/upload HD video. Another company that I like is InvenSense (INVN) which makes and sells micro-electro-mechanical systems (MEMS) gyroscopes for motion tracking devices for all kinds of applications including smartphones, tablets and of course ... drones. Finally I want to mention one last company called Trimble Navigation (TRMB), this company will probably grow much because they will help farmers manage their crops. In other words, Precision Agriculture, there is much more to write about this so I will write a separate post about Precision Agriculture. In conclusion, there are many companies to invest in and it will show up more in the future. I'm not saying that you should invest in all these companies that I have mentioned, it simply shows how many companies that exists and different ways to invest for the drone revolution. I will in other posts go through the companies that I personally own or waiting to buy and how they will get a tremendous growth with the help of the drone revolution.
If you want to buy stocks without any commissions or fees I recommend eToro. They're the world's largest social investment network, where millions of clients earn by copying the trading actions of the best traders. And by the way it's free, check it out here.
0 comments :