The Long and the Short of It: Drone Stocks Are on the Move

It is going to get very crowded in the skies above us soon.

No, the airlines are not getting back to a full schedule.

The skies are filling up with drones.

I'm not talking about the recreational drones the guy next door uses to spy on the neighbors, but commercial drones. Businesses are finding new ways to use drones to conduct business and deliver products to their customers.

Grandview Research released a report recently showing the U.S. commercial drone market is worth $5.8 billion. An estimated 274,600 units were sold in 2018.

Amazon is a big drone-growth driver. Inc. (NASDAQ: AMZN) has gotten a lot of attention for Prime Air, a delivery system from Amazon designed to safely get packages to customers in 30 minutes or less using drones.

A few weeks ago, Prime Air was approved by the FAA as an air carrier allowing the company to join Wing (an Alphabet Inc. (NASDAQ: GOOG) subsidiary) and UPS as the only companies to have the approval to use drones for package delivery.

What you're not hearing as much about is how much drones are improving industries beyond the headline-grabbing Amazon improvements - and that's where the best drone plays are for us to make money.

Meet Your New Coworker

While you won't hear about this as much as what Amazon is up to, drones play an increasing role in agricultural operations. They help farms be more productive.

According to the U.S. Department of Agriculture, the average farm in the United States is almost 450 acres. Using drones to survey crops can allow tasks that would have taken days to be completed by farmers in a matter of hours.

Using drones is not just faster and more efficient, but also more accurate. From the air, farmers will see things they would have missed when walking the land to check on crops.

Targeted spraying by drones instead of blanket spraying under current technologies can also help limit agricultural runoff's ecological damage.

Drones are playing a more prominent role in real estate as well. Real estate agents have found drones to be a powerful marketing tool. Using video from drones' realtors can show prospective buyers' properties in the office or via e-mail. Using drone video can save driving all over town to look at homes where the buyer has no interest whatsoever.

They can also provide an aerial view of the surroundings, which can often be a big part of the home buying decision.

Oil and gas companies are using drones to survey possible drilling locations and inspect pipelines. Energy companies can complete a pipeline inspection that could take weeks in a much shorter time from the air.

The industry is also using drones to inspect and protect offshore oil and gas drilling rigs.

Construction companies are using drones for 3D mapping, project management, and security services.

It is a lot harder for construction workers to slack off when the boss is gone if the boss has a drone flying over every so often.

The use of drones for industrial business purposes is going to keep increasing year after year. The fastest-growing segment will be the delivery of packages, prescriptions, and food, but other industries will be continually finding new, innovative ways to use drones.

That means companies that make drones are going to see rapidly rising profits for a very long time.

How to Play Drones: The Long of It

AeroVironment Inc. (NASDAQ: AVAV) is the leading drone stock and has been for some time.

AeroVironment sells to businesses as well as governments. This allows us to benefit from the increased military and government agency use of drones and commercial usage explosion.

AeroVironment also sells mall UAS products, including spare equipment, alternative payload modules, batteries, chargers, repair services, and customer support, as well as multiple aircraft, handheld ground control system.

This is one of those buy-and-own-forever stocks. Buy it now around its current price of $75, and if the market drops, buy more. AeroVironment has the potential to be one of the greatest growth stock stories of all time.

How to Play Drones: The Short of It

Aggressive investors might want to consider selling a cash-secured put. Remember, when you sell a cash-secured put, you put up all the money to buy the stock represented by the option. For each contract, put up a margin of enough money to buy 100 shares.

The stock gapped up from about $65 and has trend line support at the $60 area. Sell the December $65 put for $3 or more.

If the stock is put to you, you will be buying one of the most powerful growth stories of the next decade at an important support point.

If not, you pocket the premium and collect an annualized profit of more than 25%.

And in the meantime, don't forget to check out my colleague Tom Gentile's latest presentation...

You see, America's top pattern trader, Tom Gentile, has made history generating a 100% win rate off names like Boeing, T-Mobile, American Airlines, and more. And he's so confident his newest trading strategy will continue this string of success, he's willing to lay down a $3.5 million pledge on it.

The folks who were a part of the last five months got the chance to make out like bandits with this research; check out Tom's new presentation, and Tom will reveal how you can, too. Watch now...

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About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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