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Today, Money Morning Executive Editor Bill Patalon has identified one drone stock that sets itself apart from the rest. Other analysts have dismissed this company as just a "driverless car" stock or a simple automotive stock…
But Bill sees things differently. He sees this company as the ultimate way to profit from the emerging drone industry, which is going to bring a new wave of wealth to investors before the end of the decade.
In his latest installment of "Stock Talks," Bill shares with you the unique, 100-year-old "synchronicity of history" story that led him to find this stock, where he sees it going in the near future, and how you can profit from it today.
Now, here's Bill…
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Hi, I'm Bill Patalon, the founding editor at Money Morning, and I'm here to tell you a story.
I'm forever collecting things to try to give me ideas, topics to write about, things and new ideas to bring you…
And in my collection, I have this one photograph. It's a very old photograph.
It shows four cars – old cars – from the turn of the century. These are touring cars with the tops down. And they're lined up in a row as if they are getting ready for a race. But it wasn't a race they were getting ready for – it was a cross-country trip.
It was the spring of 1915, and the Lincoln Highway had just opened.
The Lincoln Highway was the first transcontinental highway in the United States. Business folks were trying to find a way to celebrate it, to recognize it, to let folks know about it.
So they hired a filmmaker named Henry Ostermann to go on the cross-country trip and to document the trip by taking pictures and movie film, which they could later use to promote the trip and cross-country travel.
The trip took four months and 3,500 miles, but they made it. And it went down in the annals of history as one of the first organized cross-country trips in America.
Now that brings me to the coincidence, the synchronicities of history…
Fast-forward exactly 100 years to the spring of 2015, and another cross-country tour…
This one in the other direction.
The first trip went from New York to San Francisco, arriving just in time for the Panama Pacific Exposition.
This next trip started in San Francisco, and it was to end in New York. But there was one difference…
There was no driver.
It was an Audi SUV, and it was specially equipped with all the latest gadgetry. Radar, lane-following technology, sensors, cameras, software, artificial intelligence…
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The goal was to make the first cross-country trip in America without a driver.
Now, here's why I'm telling you this story.
When folks think about drones, the first thing they think about is something that flies through the air. But if you think about it, a drone is a robot. It's much broader than that.
You know, drones can fly through the air. They can drive on the roads. They can sail on the water or even under the water. In fact, the U.S. Navy right now is developing a whole series of drones to protect our shores and to patrol the South China Sea.
The fact is, drones are one of the biggest opportunities I'm following right now.
According to PricewaterhouseCoopers, the big consulting firm, the market for drones services will grow from about $2 billion in 2016 to $127 billion by the end of the decade.
That's a compound annual growth rate of 182%.
Now, think about that…
The U.S. economy is growing at a rate of about 2% to 4% a year. We're talking about a business that is growing at a rate of 182% a year.
Tell me where else you're going to find that kind of growth!
In my service, Private Briefing, we've made hay with this opportunity.
We've put together a portfolio of drone stocks that we've called "The Fab Five" portfolio. None of them have gone up less than 32%; two have gone up over 100%. And one was bought out for a gain of 90% just a few months ago.
But here's the thing…
This is just the beginning.
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And today, I want to do something for you. I want to bring you a drone stock.
The company I want to talk to you about is Delphi Automotive (NYSE: APTV).
This is a company that most folks think of as a car company, but we look at it as a drone stock for three very distinct reasons.
So let's go through these one at a time, starting with reason No. 1.
Reason No. 1: Delphi Is Already a Drone Player
Most folks think of this as a car company, or even a driverless car company – and that is true.
Remember that story I told you at the beginning about the Audi that made that cross-country trip in 2015?
It was Delphi that provided all the technology that allowed that car to make the trip from San Francisco to New York – and make it safely.
Reason No. 2: Delphi Is Not Standing Pat
This company is not standing pat.
Already, the company has picked up two other startups:
- Ottomatika Inc., a Carnegie Mellon University spin-off
- And NuTonomy, a Massachusetts Institute of Technology venture
Reason No. 3: "Breaking Up" Is Good to Do
In Wall Street parlance, when a company breaks itself into two or more independent pieces, it's known as a spin-off.
I'm here to tell you that when it comes to investing in stocks, spin-off investing is about as close to a "sure-money thing" as you're going to get.
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And this is exactly what Delphi is going to do.
The company is going to break itself into two independent companies. The first, which will continue to be called Delphi, will focus on electric vehicles and powertrains. And the second, a company that will be called Aptiv, is the one that I'm very excited about.
This is the driverless car business; the drone business.
This is the one that's going to experience all of the growth, and the one we're going to focus on. This is the one that's going to generate the biggest gains for us.
But here's the thing…
You want to buy this stock now. By buying it now, by holding the stock, you get both of these companies. It's like buying one stock and getting a second one for free. It's like buying one company and getting two without having to do anything else.
This is the kicker – the thing that is really great about spin-off stocks…
This is why I love spin-offs as an investment strategy.
Research has shown, as a group, that spin-offs not only beat the market – they trounce the market.
These are stocks that, for the first two or three years after the breakup occurred, will outpace the market by 30% or 40%.
You are not going to find gains like that anywhere.
And with a company like Delphi, which is focusing on these exploding markets – electric vehicles and driverless cars/drones – the gains are going to be much, much bigger.