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Investing In The Drone Space

Last week it was amazing to witness entire expressways shut down during the Hong Kong protests.  Something which was not surprisingly given little attention by our "keep the advertisers happy at all costs" mainstream media.  *cough cough*  Thank goodness for technology with this amazing drone footage and social media for 'getting it out there'.  Afterwards I decided to take a further look into the area of investing in drone (and drone component) manufacturers.

I've thrown this together, running on battery only and no internet after having lost power due to a strong storm rolling through the region.  Hey, it's a start, right?

Face it America.  It’s only a matter of time before drone applications become commonplace and drones are buzzing past our homes like flies.  Imagine the possibilities.  Packages, mail, medical supplies, internet and wireless signals to remote or under served areas, news coverage, spraying fields with pesticides, no more lost hikers (or drivers for that matter) and yes, even law enforcement.  Sadly this also equals job loss unless you’re on the manufacturing side of the business.

Pressure is being applied to the FAA by retailers, internet and ecommerce giants in order to utilize drone technology in their services.  Thus far the FAA, under the gun to integrate drones into U.S. airspace by September 2015, has only released an initial roadmap in November 2013. The next big step is expected later this year, when the agency says it will publish rules and requirements for drones weighing less than 55 pounds.

Expansion in the drone field within just the last few years is noteworthy:

  • Cutbacks in U.S. military spending has had an impact on DoD’s drone plans. Instead of keeping the iconic U-2 spy plane for high-altitude reconnaissance, the Air Force instead is looking to retire the fleet, replacing spy planes with Northrop Grumman’s (NOC) upgraded Global Hawk drones.  You know global military forces will follow.
  • Facebook (FB) raised the ante in the commercial drone war in March 2014 with the purchase of UAV manufacturer Titan Aerospace for $60 million. Titan’s solar-powered UAVs — which can stay airborne for five years at an altitude of 65,000 feet — potentially could enable FB to cost-effectively extend the reach of the Internet and mobile services to underserved rural regions around the globe.
  • It is well known that Amazon (AMZN) has begun testing their Prime Air” concept which would dispatch small drones known as “octocopters” to deliver small packages to customers within 30 minutes.
  • In May 2013 Google’s (GOOG) venture capital unit invested over $10 million in Airware, a company that builds development platforms — autopilots — for UAVs. It’s not GOOG’s first foray into the drone sector, either: Back in 2010, the tech giant reportedly tested a battery-powered surveillance drone manufactured by Germany’s Microdrones GmbH.
  • Even China is getting into drone usage as their government reportedly will deploy UAVs with flexible parasails that are capable of spraying chemicals that freeze atmospheric pollutants and cause them to fall to the ground. The drones can reportedly carry more than 1,500 pounds of the chemicals.

From tiny aircraft that fit in the palm of your hand to commercial vehicles used to inspect power lines, the number and kinds of drones available for purchase are growing fast. Prices for smaller models are down to $40. But it's easy to spend thousands of dollars on high-end models.  They do not require healthcare coverage, 401k, pay raises nor vacation days.  Consumer models focus on basic flight and photography applications. Heavier duty devices are beginning to be used for commercial deliveries.

The major players in publicly held companies thus far are:

  1. Northrop Grumman Corporation (NOC) Providing products, services, and solutions in aerospace, electronics, information systems, shipbuilding, and technical service sectors.
  2. AeroVironment, Inc. (AVAV - the only pure drone play, publicly traded I am aware of): Designs, develops, produces, and supports unmanned aircraft systems (UAS), and efficient energy systems for various industries and governmental agencies.
  3. Lockheed Martin Corporation (LMT): Engages in the research, design, development, manufacture, integration, operation, and sustainment of advanced technology systems and products in the areas of defense, space, intelligence, and security.
  4. Science Applications International Corporation (SAIC): Provides technical, engineering, and enterprise information technology (IT) services in the United States.
  5. Textron Inc. (TXT): Operates in the aircraft, defense, automobile, industrial, and finance businesses worldwide.
  6. General Dynamics Corp. (GD),: Provides business aviation, combat vehicles, weapons systems and munitions, military and commercial shipbuilding, and communications and information technology products and services worldwide.
  7. L-3 Communications  (LLL) is a contractor in aerospace systems and national security solutions.

Who else might benefit from drone expansion?  Marketwatch’s Cody Willard chimes in on small drone component manufacturers such as IXYS, AMBA and INVN.  We’re talking power controllers, gyroscopes for motion tracking devices, chipsets and software that record and transmit/upload HD video.

Lastly here's Marketwatch's "Field Guide To Drones".  Click the images and choose your preference after the jump.  If you have more ideas, we’d love to hear from you.  The next 10 yeas will be interesting as the world adapts to drone integration.  Imagine the possibilities.

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