Promising growth sectors are hard to come by these days, but drones are shaping up as just such an industry. Barely in existence just 15 years ago, drones are becoming more important in the US military, and across an increasing number of commercial enterprises.
Earlier this year, the release of a drone model called the DJI Phantom 3 further lowered the tech barrier and many industries have begun integrating the technology.
They are far less expensive to own and operate than manned aircraft, and they can go where manned aircraft can’t. Those two factors alone make it a highly promising industry to invest in.
Where are the best opportunities to invest in drone technology right now?
There are some mixed plays – since the industry is still in its infancy – but there are a number of companies that are poised to become leaders in the field.
Here are ten such companies.
The company that gave us wearable video cameras is also developing it’s own line of drones for consumer use. The company plans to sell airborne drone cameras to ordinary citizens. It seems like a natural development given the company’s current core camera business.
The company hasn’t provided many specifics in regard to the drone camera itself, but it’s easy to imagine the potential applications. They could have use in photography (think aerial shots of weddings and other special events), use in shopping for new homes to buy or even neighborhoods to move to. And what about use as a last minute courier service for small businesses? The possibilities are unlimited, and GoPro has the name recognition – and the technology link – to make it all work profitably.
Though not a direct provider of drones, InvenSense does provide an important technology that drones require – micro-electro-mechanical system gyroscopes for motion tracking devices. These are already in use in smartphones and tablets, as well as drones.
As the size of the drone market grows, the need for gyroscopes will increase in step. InvenSense hopes to capture a large share of that market, which should insure a bright future for this company.
Google is another example of an indirect play on drones, since drones are not a part of the company’s core business, and may never be. Google has acquired a series of robotics companies, and last year they acquired Titan Aerospace. Titan makes drones that can fly up to the edge of the earth’s atmosphere – 65,000 feet – and remain in flight for up to three years. These drones will be part of Google’s “Project Loon”, which is an ambitious program designed to bring the internet to the most remote corners of the globe.
It’s not hard to imagine that this will also have a positive impact on Google Maps, enabling the application to get more and better images of the entire earth’s surface, even areas considered too remote to be reached by more conventional methods.
The Titan drones are about the size of jets, and rely on solar energy for their power, which is why they can stay in flight for so long. They could give Google a global reach that no other competitor can match.
The military industrial complex is the most logical source for plays on drone technology, at least up to this point. The military is the first sector to make large scale use of drones, and to develop and expand the technology. Lockheed Martin in one of several defense contractors that is on the cutting edge of that technology, and it is expected that military applications for drones will only expand in the future.
The US military is already using a giant unmanned balloon hovering over Afghanistan that was made by Lockheed Martin. It enables the Pentagon to watch the goings on in that troubled country on a continuous basis.
Lockheed Marin also makes other military drones, including the K-MAX, which is an unmanned cargo helicopter. As the military requires more drones for more missions, Lockheed Martin will fill the void, putting it on top of the latest in drone technology.
5. Boeing (BA)
Boeing gets nearly 20% of it’s revenues from military sales, and at least part of that is from drones. As a major supplier of hardware to the military, its role in this capacity is assured in the future.
The company’s Phantom Eye can match the Titan drone in altitude at 65,000 feet, though it can only stay airborne for four days. Still, it provides an ongoing flow of intelligence and communications, which can be of value in both military and commercial ventures. The company is also developing a series of other drones that are showing promise.
Ambarella is yet another play on drones from a non-drone maker. But the company makes something invaluable for drones – chipsets and software that record and transmit high definition videos. Its chips incorporate HD videos and images, as well as audio in a single component.
This company has actually been around for a while, so it isn’t anything close to a start-up, having been founded in 2004. The company’s technology is already in widespread use in TV broadcasting, and their compression chips are involved in a large amount of TV programming around the world. Its components are already operating to drive the latest generation of high definition security cameras.
Skycatch provides small drones that are used by clients to capture data for property owners enabling them to keep track of large areas. The drones fly over the property, then use sensors to collect information and return the information to ground operators. The company hasn’t gone public yet, but when it does, it will be well worth a close look. The company started two years ago by selling drones to commercial clients like construction and energy firms, including Chevron and Komatsu.
Japan based construction equipment manufacturer Komatsu Ltd plans to use drones to deal with a shortage of construction workers in Japan. The drones will work with driverless bulldozers to completely automate construction projects. Komatsu plans to lease at least 200 drones from Skycatch, and Skycatch management is hoping to provide drones for thousands of construction sites around the world. Some drones have already been used to assist with the clean up from the Nepal earthquake.
As one of the largest delivery operations in existence, drones are a natural development for Amazon. They plan to use drones to deliver packages to their online customers, sometimes in as little as 30 minutes. They refer to it as their “Octocopter” program. They plan to have a fleet of Amazon Prime Air helicopter drones delivering packages, and expect that they’ll become as commonplace as mail trucks or delivery services like UPS.
The company is still testing the program and it may be several years before they can roll it out on a large scale basis. As well, the delivery drones will need to obtain FAA approval, which is still something of an X factor. If and when the program goes through, Amazon will once again be on the cutting edge of a massive industry change, in which modes of delivery will change, and customer fulfillment will be close to instantaneous.
It’s not even inconceivable that Amazon could expand the drone delivery service to other retailers, radically changing the entire nature of the delivery service business.
Yet another major defense contractor that already has an inside track on drones and the technology that drives them. The company provided it’s Global Hawk – an unmanned aerial drone that can track enemy activity at an altitude of more than 60,000 feet – to the US military after the 9/11 attacks. The company continues to provide drones to the military for a variety of other roles.
The company is one of the largest US defense contractors, with annual revenues in the billions. Drones comprise just a small percentage of that revenue at present, but it’s virtually assured to grow as military applications for drones are only likely to increase in the future.
IXYS Corp doesn’t manufacture drones, but it does provide the power controllers and power chipsets that are used in drones. In fact, one of the most important aspects of power in regard to drones is that they need to generate it as efficiently as possible in order for the drones to be economical. As a supplier to the drone industry for critical components, the future for this company looks bright indeed.
The company has been showing solid revenue growth, which should continue as demand increases from both industrial power and communications.
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That’s ten stocks to get you started. But drones are a new technology that is changing continuously, so keep an eye out for new investment opportunities as they arise.
Buyouts of small, independent drone companies may represent the best opportunities available, as large companies buy up the little guys.