In this article, we discuss 10 best military drone stocks to invest in.
Drone technology has exploded into the mainstream ever since the United States government granted exemptions to companies to operate drones in the fields of insurance, construction, and agriculture, expanding the scope of the drone tech outside the military space. The Federal Aviation Administration also helped devise a regulatory framework for commercial drones to help the market further. Since then, tech firms have been doing all they can to bring drone tech to as many businesses as possible.
However, even as the drone market expands, defense firms like Honeywell International Inc. (NASDAQ:HON), Raytheon Technologies Corporation (NYSE:RTX), and Lockheed Martin Corporation (NYSE:LMT) remain some of the biggest manufacturers of the unmanned air vehicles. According to data collected by Research and Markets, the drone services market size is expected to grow to more than $63 billion by 2025 as consumer drone shipments cross the 30 million mark in 2022.
Even large investment advisors are bullish on the drone sector. Goldman Sachs forecasts the total drone market size will be worth $100 billion in the coming years on the back of the growing demand for drones from the commercial and government sectors. Similarly, Markets and Markets research shows that the drone sector will reach a value of over $58 billion by 2026, growing at a compound annual growth rate of more than 16% from 2021. The market for small drones is also expanding and will reach $22.55 billion in value by 2026.
Our Methodology
The companies that operate in the military drone sector were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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Best Military Drone Stocks To Invest In
10. EHang Holdings Limited (NASDAQ:EH)
Number of Hedge Fund Holders: 2
EHang Holdings Limited (NASDAQ:EH) operates an autonomous aerial vehicle (AAV) technology platform company in the People’s Republic of China, East Asia, Europe, and internationally. It is one of the best drone stocks to invest in. On October 13, EHang Holdings stated that its EH216 AAV has performed successful flight demonstrations in Spain under the European Union’s Air Mobility Urban Large Experimental Demonstration project.
At the end of the second quarter of 2022, 2 hedge funds in the database of Insider Monkey held stakes worth $8.5 million in EHang Holdings Limited (NASDAQ:EH), compared to 2 the preceding quarter worth $12.9 million.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in EHang Holdings Limited (NASDAQ:EH), with 882,416 shares worth more than $8 million.
Just like Honeywell International Inc. (NASDAQ:HON), Raytheon Technologies Corporation (NYSE:RTX), and Lockheed Martin Corporation (NYSE:LMT), EHang Holdings Limited (NASDAQ:EH) is one of the best drone stocks to monitor.
In its Q1 2021 investor letter, Alger, an asset management firm, highlighted a few stocks and EHang Holdings Limited (NASDAQ:EH) was one of them. Here is what the fund said:
“EHang Holdings Limited (NASDAQ:EH) was among the top detractors from performance. EHang Holdings Limited (NASDAQ:EH) operates an autonomous aerial vehicle (AAV) technology platform in China. It designs, develops, manufactures, sells and operates AAVs, as well as their supporting systems and infrastructure, for a range of industries and applications, including passenger transportation, logistics, smart city management and aerial media solutions. EHang is an opportunity to invest in the state-driven objective of China involving commercializing passenger-grade drone travel and EHang Holdings Limited (NASDAQ:EH) is by far the only AAV operator expected to receive a commercialization permit this year. Domestic rollouts of services starting in 2021 could potentially be a major inflection point in AAV adoption curve. Recently a short report came out attacking the integrity of EHang Holdings Limited (NASDAQ:EH) business practices and the stock has tumbled. Since then, EHang Holdings Limited (NASDAQ:EH) has provided evidence as part of rebutting the claims and an upcoming earnings call could potentially clear the remaining concerns.”
9. AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 10
AeroVironment, Inc. (NASDAQ:AVAV) designs, develops, produces, delivers, and supports a portfolio of robotic systems and related services for government agencies and businesses in the United States and internationally. It is one of the premier drone stocks to invest in. On August 22, RBC Capital analyst Ken Herbert maintained an Outperform rating on AeroVironment, Inc. (NYSE:AVAV) stock and raised the price target to $115 from $100, highlighting that the shares represented more significant upside given the firm’s new contracts.
At the end of the second quarter of 2022, 10 hedge funds in the database of Insider Monkey held stakes worth $181 million in AeroVironment, Inc. (NASDAQ:AVAV), compared to 10 in the previous quarter worth $182 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm ARK Investment Management is a leading shareholder in AeroVironment, Inc. (NASDAQ:AVAV), with 1 million shares worth more than $92 million.
8. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS)
Number of Hedge Fund Holders: 20
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) operates as a government contractor for the US Department of Defense. It is one of the elite drone stocks to invest in. On September 22, the US Army Tactical Aviation and Ground Munitions awarded AeroVironment a $20.6 million contract for the procurement of Switchable 300 tactical missile systems. The contract will be managed by the US army Contracting Command.
On October 6, Jefferies analyst Sheila Kahyaoglu maintained a Hold rating on Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) stock and lowered the price target to $12 from $16, noting that labor headwinds had the potential to impact the firm’s profits.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm ARK Investment Management is a leading shareholder in Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), with 8.2 million shares worth more than $83 million.
At the end of the second quarter of 2022, 20 hedge funds in the database of Insider Monkey held stakes worth $160 million in Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), compared to 17 in the previous quarter worth $248 million.
7. Joby Aviation, Inc. (NYSE:JOBY)
Number of Hedge Fund Holders: 20
Joby Aviation, Inc. (NYSE:JOBY) is a vertically integrated air mobility company that engages in building an electric vertical takeoff and landing aircraft optimized to deliver air transportation as a service. It is one of the major drone stocks to invest in. On August 10, Joby Aviation announced that it had expanded its existing contract with the US Air Force’s Agility Prime Program. The expansion increased the potential value of the contract by more than $45 million. The contract also widened the company’s defense partnership to include the US Marine Corps.
On August 16, Deutsche Bank analyst Edison Yu maintained a Hold rating on Joby Aviation, Inc. (NYSE:JOBY) stock and lowered the price target to $7 from $8, noting that the company was expecting a difficult time beginning commercial operations in 2024.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in Joby Aviation, Inc. (NYSE:JOBY), with 620,000 shares worth more than $3 million.
At the end of the second quarter of 2022, 20 hedge funds in the database of Insider Monkey held stakes worth $30 million in Joby Aviation, Inc. (NYSE:JOBY), compared to 30 in the previous quarter worth $79 million.
6. GoPro, Inc. (NASDAQ:GPRO)
Number of Hedge Fund Holders: 25
GoPro, Inc. (NASDAQ:GPRO) develops and sells cameras, mountable and wearable accessories, and subscription services and software in the United States and internationally. It is one of the prominent drone stocks to invest in. On September 13, GroPro revealed that it is offering a sizable discount to anyone willing to sign up for a GoPro subscription after purchasing a new launch of the Hero 11 Black camera. On August 16, the CEO of GoPro stated that its GoPro subscription service had surpassed two million subscribers.
On October 17, Morgan Stanley analyst Erik Woodring maintained an Equal Weight rating on GoPro, Inc. (NASDAQ:GPRO) stock and lowered the price target to $6.10 from $7.30, noting that there was further estimate downside due to a challenging Q3.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Prentice Capital Management is a leading shareholder in GoPro, Inc. (NASDAQ:GPRO), with 6.9 million shares worth more than $38 million.
At the end of the second quarter of 2022, 25 hedge funds in the database of Insider Monkey held stakes worth $125 million in GoPro, Inc. (NASDAQ:GPRO), compared to 26 in the previous quarter worth $229 million.
In addition to Honeywell International Inc. (NASDAQ:HON), Raytheon Technologies Corporation (NYSE:RTX), and Lockheed Martin Corporation (NYSE:LMT), GoPro, Inc. (NASDAQ:GPRO) is one of the best drone stocks to buy according to hedge funds.
5. Ambarella, Inc. (NASDAQ:AMBA)
Number of Hedge Fund Holders: 27
Ambarella, Inc. (NASDAQ:AMBA) develops semiconductor solutions that enable high-definition (HD) and ultra HD compression in videos, image processing, and deep neural network processing worldwide. It is one of the best drone stocks to invest in. On June 22, an autonomous driving truck technology and operation company, Inceptio Technology, selected Ambarella’s CVflow systems on chip for its automotive grade central computing platform.
On October 11, Needham analyst N Quinn Bolton maintained a Buy rating on Ambarella, Inc. (AMBA) stock and lowered the price target to $90 from $110.
At the end of the second quarter of 2022, 27 hedge funds in the database of Insider Monkey held stakes worth $214 million in Ambarella, Inc. (NASDAQ:AMBA), compared to 32 in the preceding quarter worth $319 million.
In its Q2 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Ambarella, Inc. (NASDAQ:AMBA) was one of them. Here is what the fund said:
“Ambarella, Inc. (NASDAQ:AMBA) is a leading supplier of video processing and computer vision chips used in the security and automotive markets. The company continues to face supply headwinds as well as some disruptions among its customers in China related to COVID lockdowns.”
4. Northrop Grumman Corporation (NYSE:NOC)
Number of Hedge Fund Holders: 45
Northrop Grumman Corporation (NYSE:NOC) operates as an aerospace and defense company worldwide. It is one of the top drone stocks to invest in. On October 4, the US Army awarded a $69.82 million modification contract to the firm to provide mission support for the planning, coordination, and execution of exercises conducted by US Army’s Mission Command Training Program. The work will be completed by October 2023.
On October 11, Credit Suisse analyst Scott Deuschle initiated coverage of Northrop Grumman Corporation (NYSE:NOC) stock with an Outperform rating and a $560 price target, noting that the company has the strongest strategic positioning within the industry and offers the best multi-year sales growth in defense.
At the end of the second quarter of 2022, 45 hedge funds in the database of Insider Monkey held stakes worth $992.9 million in Northrop Grumman Corporation (NYSE:NOC), compared to 39 in the previous quarter worth $940 million.
In its Q2 2022 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and Northrop Grumman Corporation (NYSE:NOC) was one of them. Here is what the fund said:
“Based in Virginia, Northrop Grumman Corporation (NYSE:NOC) is one of the world’s largest defense contractors with annual revenue of more than $30 billion. The company operates in a cozy oligopoly, that after decades of consolidation the US defense market is now controlled by five large companies: The Boeing Company, General Dynamics Corporation, Lockheed Martin Corporation, Northrop Grumman Corporation, and Raytheon Technologies Corporation.
Industry barriers to entry are immense, government procurement cycles are extremely long, and the consolidated industry structure reflects this. This industry structure has allowed Northrop to earn stable mid-teens returns on invested capital (ROIC) and grow earnings per share at a rate of over 13% per year in the past decade, despite a topline that has grown only in-line with inflation. Even after the recent run-up in the stock price, it trades at approximately 15x, next year’s earnings estimates, far below the S&P 500 index, despite being an above average company. While nominally, there are five major defense contractors, the true industry concentration is even higher because not all companies compete in all possible business segments. General Dynamics’ division submarine division, Electric Boat, is the sole supplier of nuclear power submarines in the United States. Lockheed Martin is the sole supplier of the F-35 and F-22. Northrop was the sole bidder on the contract to develop the next generation of intercontinental ballistic missiles; and so on.
The company’s revenue growth over the past decade has been mediocre but even that has led to impressive shareholder returns that have far outpaced the S&P500. What’s more, we believe that revenue growth may accelerate in the next few years. A lot of ink spilled every year about the “massive” U.S. defense budget7 that critics claim is “out of control”8. Given this, you might be surprised to hear that U.S. defense spending as a share of GDP is at the lowest level in recorded history,9 at a mere 3.8%. In other words, U.S. military spending could double and not be out of line with historical norms. While we are not calling for a new Cold War, given the global instability we are witnessing, it is not unreasonable to expect defense spending to grow faster than GDP over the next decade.”
3. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 51
The Boeing Company (NYSE:BA) designs, develops, manufactures, services, and supports commercial jetliners, military aircraft, satellites, missile defense, and human space flight and launch systems. It is one of the elite drone stocks to invest in. On October 17, the Boeing Company announced that it is offering 737 MAX jets that had been made for Chinese customers to Air India. The company is seeking to find other buyers for 140 planes which are not permitted to deliver in China.
On October 10, Wolfe Research analyst Myles Walton initiated coverage of The Boeing Company (NYSE:BA) stock with an Outperform rating and $180 price target.
At the end of the second quarter of 2022, 51 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in The Boeing Company (NYSE:BA), compared to 52 in the preceding quarter worth $1.4 billion.
In its Q2 2022 investor letter, Meridian Funds, an asset management firm, highlighted a few stocks and The Boeing Company (NYSE:BA) was one of them. Here is what the fund said:
“We similarly remained invested in largely out-of-favour The Boeing Company (NYSE:BA), a global leader in developing and producing commercial jet aircraft. Due to some self-inflicted wounds and a bit of bad luck, as well as dramatic declines in air travel early in the pandemic, investor sentiment for this company has simply been awful. As part of our contrarian thinking, however, we view the business as critical to global transportation needs and see multiple catalysts to improve sentiment. In addition to the current surge in air travel worldwide, ramped up production of the 737 MAX aircraft and the pending restart of 787 Dreamliner deliveries should help turn broader sentiment. Additionally, we anticipate a meaningful inflection in cash flow as Boeing starts delivering aircraft currently in storage as well as the eventual expansion of its production in both core platforms.”
2. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 55
Lockheed Martin Corporation (NYSE:LMT) is a security and aerospace company that engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. It is one of the premier drone stocks to invest in. On October 4, Lockheed Martin Corp was awarded a $35.8 million modification contract against a previously issued basic ordering agreement. The modification adds scope and increases the contract ceiling for F35 lightning II Lot 15-16 batch 2 Ancillary Mission Equipment for the US Navy, Air Force, and Foreign Military customers.
On October 10, Wolfe Research analyst Myles Walton initiated coverage of Lockheed Martin Corporation (NYSE:LMT) stock with a Peer Perform rating and no price target, noting that the company has a strong position in the defense sector.
Among the hedge funds being tracked by Insider Monkey, California-based investment firm ARK Investment Management is a leading shareholder in Lockheed Martin Corporation (NYSE:LMT), with 34,182 shares worth more than $13.2 million.
In its Q3 2022 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Lockheed Martin Corporation (NYSE:LMT) was one of them. Here is what the fund said:
“Lockheed Martin Corporation (NYSE:LMT) is one of the world’s largest aerospace and defence companies. The war in Ukraine has reminded investors and the wider public just how important these companies are. The aerospace and defence industry in the USA is an established oligopoly. This means that a few large firms play a dominant role. While collectively they comprise an oligopoly, individually they often have monopoly positions in particular narrower segments. Their main counterparty is the US government, a key customer in what is known as a monopsonist position. This is a rather unusual situation, but one that is very advantageous for companies such as LMT.
LMT has a strong and long-term sustainable competitive advantage ensuing from the fact that its products are developed and manufactured at an extremely high level of technology and complexity, its development and contract cycles are measured in decades, and the costs for the government to switch to alternative suppliers are high. Moreover, part of the production is classified as secret, which further takes the wind out of the sails of potential competitors. This results in a very high return on capital and admittedly a slowly but steadily growing business.
In most NATO countries, which are LMT’s customers, defence outlays are based upon the size of GDP. This is currently growing very fast in nominal terms due to inflation in most countries. A number of countries have also announced significant increases in defence budgets, whether it be Germany, which aims to get to the NATO-agreed 2% of GDP, or Poland, which wants to spend more than twice as much on defence…(read more)
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, compute, and networking solutions in the United States, Taiwan, China, and internationally. It is one of the prominent drone stocks to invest in. On October 15, NVIDIA stated that it is launching the GeForce RTX 4080 12GB graphic cards.
On October 18, Deutsche Bank analyst Ross Seymore maintained a Hold rating on NVIDIA Corporation (NASDAQ:NVDA) stock and lowered the price target to $140 from $165, noting that the company expects Q3 earnings to yield more pervasive signs of weakness.
At the end of the second quarter of 2022, 84 hedge funds in the database of Insider Monkey held stakes worth $3.3 billion in NVIDIA Corporation (NASDAQ:NVDA), compared to 102 in the preceding quarter worth $36.4 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them were large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA Corporation (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…(read more)
You can also take a peek at 10 Best MLP Dividend Stocks to Buy and 10 Best Stocks to Buy According to Billionaire Dan Loeb.
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Disclosure. None. 10 Best Military Drone Stocks to Invest In is originally published on Insider Monkey.
