The F-35B stealth fighter from Lockheed Martin Corp. wowed the crowd in its British debut. The ultra-sleek aircraft not only hovered but also turned 360 degrees.
Then there was 737 MAX from Boeing Co. (NYSE: BA). The huge passenger jet, showing off for the first time for an international audience, accomplished an incredible near-vertical takeoff before leveling off and plunging… all on purpose.
Then there were the always hotly watched “backroom deals” – in which Airbus Group SE racked up orders and commitments for 279 planes worth $35 billion, while Boeing brought in orders and commitments for 182 airplanes worth $26.8 billion.
I’m talking about the Farnborough International Airshow, which took place about a week ago near the southern coast of England.
It’s a signature industry meeting in which commercial aerospace and defense firms pile up big sales.
But those stories above are about “old aviation.”
As amazing as some of those aeronautical feats and big-number deals were, the real story at Farnborough involved a fleet of 90 highly advanced tiny fliers.
They truly knocked my socks off, because they point right to the future of a $55 billion industry.
When Lampposts Go High Tech
I’m guessing that when you think of high technology – the sort of thing we look to invest in here – you don’t consider lampposts.
I know I don’t.
But then, most of us aren’t e-commerce giant Amazon.com Inc. (Nasdaq: AMZN).
Amazon just earned itself a patent for “docking stations” – similar to the charging stations for electric vehicles that you see in some parking lots. Except these docking stations will be attached to lampposts and the rooftops of buildings.
And once they’re installed, these stations will, within the next few years, give Amazon and others places to land and charge their delivery drones.
In fact, this patent is just the latest evidence that domestic, commercial uses for unmanned aerial vehicles (UAVs) – drones – are much greater and much further along than many of us imagined.
Here’s how this connects to the Farnborough International Airshow…
The 90 drones on hand set a record for the airshow. This year’s show also hosted its first-ever drone race – designed to build interest in the technology and also to discuss public safety aspects. And the UAV demos went far beyond races, package deliveries, and defense uses like surveillance and antiterrorist strikes.
Airbus, which aims to become a top commercial UAV vendor, demonstrated how its drones can transmit data via laser beams to satellites or even airliners. To accomplish this, a nine-pound sensor/transmitter terminal would ride on a twin-prop, electric-powered drone that can stay aloft for five hours.
Need more proof that now is UAVs’ time to shine?
The British drone trade group ARPAS-UK says it now has 400 members, compared with roughly 100 just a year ago.
And the Federal Aviation Administration last month released new rules for small UAVS, those weighing less than 55 pounds and used for such commercial purposes as surveys, films and photography. These new rules are vital for the UAV field because it gives legal status to an industry that had been operating in the dark for years.
That’s great, you say — but what about dollars and cents?
According to the aerospace consultants at the Teal Group, that the UAV sector, not counting hobbyists, will more than triple over the next 10 years – from $4 billion last year to $14 billion. Teal also estimates that UAV developers, over that period, will invest $93 billion on the commercial side along with $30 billion on defense uses.
In other words, we are at the tipping point for commercial drone use.
And that means it’s time to make an investment in this rapidly growing field.
I believe the best way to do so is to avoid picking and choosing a “pure” drone play – and instead get on board a moneymaker that gives you access to the huge growth in drones… and the stability of aviation and defense.
UAVS… and a Whole Lot More
Here I’m talking about the iShares US Aerospace & Defense (NYSE: ITA) exchange-traded fund (ETF).
With this one ETF we gain access to firms “taking a flier” on both civilian and defense drone tech. It also gets us into the huge earnings from military aircraft and all kinds of of defense technology. I’m talking such firms as…
- Northrop Grumman Corp. (NYSE: NOC): Because it’s a top defense contractor, it comes as no surprise that Northrop Grumman makes manned and unmanned aircraft for defense applications. But it’s also collaborating with Yamaha to develop a “pilot-less” helicopter packed with intelligence-gathering equipment for such civilian uses as search and rescue and forest-fire observations. Of course, Northrop is deep into providing the military with electronic warfare and infrared countermeasures. In addition, the firm gives us a strong play on a sensor technology, advanced materials and laser weapons systems.
- Lockheed Martin Corp. (NYSE: LMT): Lockheed makes a full range of unmanned vehicles – covering air, land and sea drones for both military and commercial uses. The company is widely known the Desert Hawk III, a drone used by the U.K. military to watch suspected terrorists. It also makes the Marlin, an oceangoing drone that conducts surveys and inspections. And as you know, Lockheed Martin is a full-line defense firm that develops combat ships and ground vehicles as well as advanced radar and tactical communications. It’s also involved in space exploration, satellite systems, climate monitoring, cybersecurity and cloud computing.
- Raytheon Co. (NYSE: RTN): This company gives us a great “backdoor” play on unmanned technology. Instead of developing UAVS themselves, Raytheon is behind the Common Ground Control System. The military uses this open-format control station to control all manner of UAVs. And it will likely be adapted for civilian use. Raytheon also provides the Pentagon with capabilities for electronic warfare, laser rangefinders, military training and advanced radar.
With this one investment, we benefit from the growing use of air, sea and land drones for both defense and business activity. We also get access to a wide range of advanced defense technology and commercial aircraft sales.
This way we benefit from the entire drone sector’s growth with a broad and diverse ETF. It’s a cost-effective way to invest in virtually every aspect of the coming boom in drones – and the growth in global aviation.
Trading at about $129, ITA has greatly outperformed the broader market over the past two years. During that period, it has gained some 19%, more than double the S&P 500’s 9.6% gain.
So, with this you can get ready for short-term growth and long-term stability… and keep your eye on that lamppost on the corner.
See you next week.
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