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Profiting from Commercial U.S. Drones

Written By Brian Hicks

Posted August 2, 2013

So you’re heating up a nice bag of popcorn and getting ready to sit down for a movie with the family. You hear buzzing noises outside of your home. You step outside to find a creepy spider-like drone hovering over your house, with a camera fixed on you and your family.

Before you know it, the thing scurries off to harass your next door neighbor.

drone picAs unlikely as that scenario seems currently, it is an all too real possibility over the next few decades.

2015 will be the year in which full FAA regulations will be set in place for domestic drone use.

But two drones have already been approved by the FAA to patrol the Alaskan coast. The Insitu Scan Eagle 200 will be used to keep watch over marine life and icebergs, while the AeroVironment (NASDAQ: AVAV) PUMA will patrol oil spills in the Beaufort Sea.

These drones have benevolent intentions, but in the words of President Dwight D. Eisenhower, speaking of the military industrial complex, “The potential for the disastrous rise of misplaced power exists.”

This is especially true of drones.

The FAA estimates there could be as many as 30,000 drones in American skies by 2020.

Drone usage in the commercial sector can benefit the public, but it also creates an atmosphere of distrust and potential violations of privacy and property rights. Civilian control of drones is not yet being considered, but commercial approval only yields a slippery slope to the eventual selling of drones to civilians. And those civilians may not always have noble intentions.

We’re beginning to see the seedlings of opposition to domestic drones. Deer Trail is a small town in Colorado that passed an ordinance in issuing licenses and bounty rewards for hunters who shoot down UAVs. While the town recognizes federal laws, it is a feel-good piece of legislation that sends a signal that drone activity is not welcome in the town of Deer Trail. And it shows how impassioned many people are about drones hovering over them in public.

Some companies have already taken notice of this opposition, which is why new forms of technology are being introduced to block drone surveillance.

A company with military ties by the name of Domestic Drone Countermeasures is in the midst of developing technology that would essentially block any drone from recording or sending data to its source.

The operation is hush-hush, and not many details have been given on the project, but the company is hoping to appeal to companies that want safety measures against corporate sabotage or spying, as well as privacy advocates who wish to protect their homes or places of business.

This type of technology will be non-destructive, but it will block any monitoring over the skies.

There are also other devices on the market allowing a person to easily scramble the circuitry of a drone from inside his own home.

This type of counter-market may receive push-back from companies that use drones and the FAA, but there is a demand for it, so keep your eyes peeled for counter drone technology as UAVs become more prevalent.

On the other hand, if you wish to invest in drone use in the commercial sense, there are a variety of investment areas worth exploring.

Company Drones

Companies using UAVs can be a good thing, especially in regards to the oil industry. Drones can survey mass landscapes of energy infrastructure like pipelines, potentially spotting leaks early and playing a large role in containing devastating spills.

The same can be said for the agricultural industry, with the potential for drone surveillance of crops on behalf of farmers, spotting any damage to plants.

Drone use can also extend to the construction and telecommunications fields, where workers would not have to place themselves in danger by climbing towers or reaching dangerous areas.

And airline companies are considering passenger drones, fully manned by machines instead of pilots, something that could reduce human error and the likelihood of accidents.

Drones can also be useful in the maritime industry, so ships can navigate through icebergs or foggy waters.

Security personnel can make full use of drones when patrolling vast areas like industrial warehouses.

Drones may be controversial, but they have a variety of uses that can be beneficial to companies and the public at large when used in the right way.

Drone Hotspots

Major drone makers include Northrop Gruman Corp. (NYSE: NOC), Lockheed Martin (NYSE: LMT), and Boeing (NYSE: BA). Drones have the potential to permeate a multitude of industries, but keep a visual on the oil industry, particularly off the coast of Alaska.

Energy companies like BP (NYSE: BP) and Royal Dutch Shell (NYSE: RDS.A) have been testing drones in Alaska to survey ocean waters and get a sense of marine life.

And drones can play a definite role out in the Arctic, where more energy companies are looking for untapped oil reserves.

Oil-spill cleanup companies can also make full use of drones in the event of a major spill to get a full assessment of damage and to guide cleanup efforts.

Aside from coastal waters, drones can be an extra pair of eyes in war-torn parts of the world, where pipelines tend to be targets of terrorist strikes.

If you’re looking for drone investing outside of the U.S., Israel is the largest exporter of drones in the world. And Israel has quite a presence in Latin American countries like Venezuela, Ecuador, Peru, Chile, and Colombia.

These countries are using drones for policing, fighting drug trafficking, and monitoring borders.

Between 2005 and 2012, Israel sold $500 million worth of drones to Latin American.

Two prominent Israeli companies in Latin America are Israel Aerospace Industries and Elbit Systems (NASDAQ: ESLT).

American drone makers are seeking to compete with their Israeli counterpart, but General Atomics is the only company that has received permission from the U.S. government to market drones overseas.

As the drone industry becomes established, more U.S. companies will be able to compete in Latin America and elsewhere.


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