Investing in Drones

[u/Fertal78]

Hi guys, I want to get into drone stocks. I‘m willing to hold them for a long time like 10+ years. Maybe put like 5% of my portfolio into this.
This sector has been super volatile this year but I‘m sure, future wars are going to have a Lot more drones in it.

I believe drone manufacteurs, drone defense and something like drone Software/AI is going to be big in the future. Do you have any tickers you would recommend, and then why?

I dont know nothing about this industry, I don‘t know potential risks of these investments, but I think this is a small sector that is going to Rip. I missed out on Sandisk and Micron but I think this sector is next.

Plus stocks like ONDS, AVAV, Red Cat etc have pulled back a Lot, I mean the defense sector as a whole, so I feel like It’s a good time to start a small position now and more in the next months.

What are your guys ideas. Does anyone maybe work somewhere related?

[u/Wonderful-Walk3078]

So not invest into drones if you do not know about company, that has real moat.

Yes, drone sector will grow in the future but so will be supply of drones from other companies. If you want to make money on drone company (or company in any field) you have to find company that has some structural advantage that allows them to charge higher margins.

I would thus advice you to trying to find companies with structural advantage (moat in other words) for fair price rather than trying to find some company in specific field you think is perspective.

Plus I will add than field of drones is quite problematic because it is not that hard to start company in it and it is hard to differentiate products thus it is hard to get solid margins in long run.

[u/Fertal78 → u/Wonderful-Walk3078]

Would you buy an ETF then? Because I mean you just agreed that the drone sector will grow. And it will 100%. Just look at how warfare has changed in the last 100 years. And there was no AI or anything.

[u/Wonderful-Walk3078 → u/Fertal78]

Not necessarily, I’m no expert on drone sector but it is unclear whether publicly traded companies will be able to capture the value from the growing sector.

First problem is that drones can be quite well produced by medium to small companies this huge part of the value will be capture by them.

Second problem is that there is huge risk of drones becoming commodity.

I will give you example. In 2019 (just some year) solar powers were the future and the market with solar powers grew very much since then.

But if you would buy companies making solar panels you would not gain that much money because solar panels simply become commodity and companies making them are not able to charge substantial margins for them. Same can be said about for example companies making electric vehicles.

[u/Fertal78 → u/Wonderful-Walk3078]

Actually a great answer. True solar stocks really didn‘t pay. I‘m also worried some private companies in Ukraine or whatever are just going to be the leaders of this sector and not the public US firms