Over the past four or five years rapid advances in technology have allowed scientists to develop highly sophisticated UAVs (Unmanned Aerial Vehicles). Thanks to their incredible capabilities and their low cost, the UAV market is growing rapidly and this article examines how investors can profit from it.
The rise of UAVs
Thanks to the rapid miniaturization of batteries, motors and other components found in everyday devices such as mobile phones and games consoles, scientists and engineers now have the technology to build high-tech drones.
UAVs were embraced by the military some time ago, and the US Air force is now training more drone pilots than traditional pilots. However these high-tech craft are now being used by many other groups including the police, customs officials, real estate agents and the paparazzi.
One common design of drone is the nano quadrotor, which has four small electric lift motors linked to a central body. Equipped with a GPS and autopilot, these craft are not only capable of agile flight, they can also carry a payload such as a high definition camera.
Developed by KMel Robotics, the nano quadrotors shown below have the ability to fly in tight formations, and this “swarm” of drones is capable of automatically navigating around objects in their path. In one experiment, conducted by a team at the GRASP Lab at the University of Pennsylvania, they were even programmed to perform the James Bond theme on various musical instruments.
Nano quadrotors flying in formation
Often referred to as FPV (First-Person View), or RPV (Remote-Person View) vehicles, these next generation radio controlled aircraft are becoming increasingly popular. This is partly because the high-tech hardware is now available on the internet from as little at £250 ($400), and also because some of the craft can be controlled using a simple app on a tablet PC such as an iPad.
These drones are becoming ever smaller and less expensive, and it has been estimated that by 2020 there will be as many as thirty thousand of them in the skies over America.
In November 2010 a group known as Team BlackSheep demonstrated the capability of drones by buzzing the statue of Liberty in New York and they have since performed similar stunts in other major cities.
Team BlackSheep flying a UAV over New York City
The craft shown here has a range of around 10 miles and can capture high definition video. The group’s website showcases some of their other hardware.
Right now this kind of long range, high altitude flying is illegal in America. However in 2015 authorities plan to open up the skies to civilian drones and the commercial applications for such craft are enormous.
How to profit from the growing UAV market
One company to watch in this space is AeroVironment, which trades on the NASDAQ Global Market under the symbol AVAV. The company builds 85% of the US Military’s small drones and has now launched its first drone for use by the police.
A 5 year chart of AeroVironment Inc. (Click on the chart for a larger version)
Chart courtesy of stockcharts.com
Another company involved in the manufacture of drones for the fast growing retail market is Paris based Parrot. The company makes the AR Drone and is listed on the NYSE Euronext under the symbol PARRO.
Parrot is an interesting company, however it is by no means a pure play on UAVs since it is also engaged in the design and manufacture of other technologies such as wireless devices for mobile phones and hands-free systems for cars,
The bottom line
The capability and low cost of drones versus conventional aircraft makes them attractive to a host of different industries and users, including: energy companies (for pipeline/ rig inspections), agricultural companies (for crop spraying), as well as fire departments, search & rescue teams, and disaster relief agencies.
Political, legal and ethical issues aside, the multi-billion dollar UAV market has excellent growth prospects and therefore it is an industry that should be of interest to investors.