A 1,000% Growth Opportunity by 2021

Matthew Carr By Matthew Carr
Emerging Trends Strategist, The Oxford Club

Market Trends

In 1959, U.S. Postmaster General Arthur Summerfield boldly proclaimed, “Before man reaches the moon, your mail will be delivered within hours from New York to Australia by guided missiles. We stand on the threshold of rocket mail.”

That prediction didn’t come true, but maybe the reality is even more amazing…

We’ve long been able to send messages from New York to Australia instantaneously. That’s all thanks to the internet.

And some of what Summerfield hazily perceived on the horizon is coming true. There won’t be rockets landing on our doorsteps… but he wasn’t that far off.

It will, however, be one of the fastest-growing segments over the next several years.

By 2021, this market – just on the consumer side – will have grown 961% from 2015. In just seven years, it’ll accomplish tenfold growth.

On top of this, companies involved in this segment have doubled the performance of the broader markets.

I’m talking about drones.

In December 2016, Amazon (Nasdaq: AMZN) delivered its first package by drone. It’s not “rocket mail” per se, but probably as close as we might ever get. It took a mere 13 minutes from the time “Place Order” was clicked to the time the package – an Amazon Fire TV Stick and a bag of popcorn – arrived at the customer’s doorstep.

Amazon is not alone here. Domino’s (NYSE: DPZ) and Mercedes-Benz are also experimenting with drone delivery.

In retrospect, Summerfield’s vision wasn’t that bizarre… though his timeline was off.

Here at Energy & Resources Digest (as well as in our monthly newsletter Oxford Resource Explorer), we continue to study disruptive technologies, such as drones, that are spearheading the “Fourth Industrial Revolution” (4IR).

And we’re witnessing explosive growth for this tech segment.

Just a couple of years ago, drones expanded from military use and entered the consumer mainstream.

But the drone industry is just starting to “take off”…

One prediction is that global shipments will surge from 6.4 million units in 2015 to 67.9 million in 2021…

This growth has been so profound in such a short period of time that we can actually laugh at another flawed prediction…

In 2010, the Federal Aviation Authority estimated that by 2020, there would be 15,000 consumer drones in the skies.

Last year, U.S. consumer drone sales more than doubled from 2015’s sales with 2.4 million drones.

Now, consumer electronics rapidly decline in price over time. This is why revenue for the consumer drone market will grow just 163.2% by 2021 from $1.9 billion to $5 billion.

But there’s a much larger opportunity for drones…

In fact, the global addressable market for commercial drones has swelled to more than $127 billion.

So that $5 billion consumer market is just a drop in the bucket.

And it’s the energy and resource sectors that will represent the lion’s share of the opportunity.

This includes oil and natural gas, as well as other energy segments.

Companies like General Electric (NYSE: GE) and AeroVironment (Nasdaq: AVAV) are building drones specifically for the oil and gas industry.

Drones can inspect pipelines for leaks, inspect power and transmission lines, and survey fields.

An estimated $45 billion will be spent on commercial drones by the infrastructure sector for the construction of railways and other projects.

Another $32 billion will be spent by the agriculture sector, where drones are already being used to reduce field maintenance costs and conduct crop monitoring. I’ve covered this previously with Raven Industries (Nasdaq: RAVN).

And there’s a $4 billion potential for the mining industry.

Already, Hexagon AB’s (OTC: HXGBF) mining segment is using drones for blast optimization, faster surveying and overall improved safety.

Mines are full of places where foot traffic is ill-advised or extremely difficult. And this is why the industry is welcoming 4IR technologies like robots, self-driving vehicles and automation.

Drones are another perfect fit. And they can easily be used for aerial photogrammetry.

For miners, there’s always been a need for this. But manned aircraft was either too expensive or inconvenient because of the remote locations of many mines.

Drones offer a solution. And even better, they can be used underground as well.

All this growth – and the wide range of industries adapting this 4IR technology – means there are a lot of opportunities for investors.

And for those looking to cast a wide net, few solutions are better than the PureFunds Drone Economy Strategy ETF (NYSE: IFLY).

Year to date, the ETF is up more than 25%. That’s more than double the performance of the Dow Jones Industrial Average.

Plus, it has completely outpaced the SPDR S&P Oil and Gas Equipment and Services ETF (NYSE: XES), which is down more than 40%…

Drone Economy’s largest holdings are AeroVironment, Parrot SA (OTC: PAOTF) and Boeing (NYSE: BA). But I like it because it also provides exposure to companies like Hexagon (a top 15 holding), as well as many foreign drone companies.

The disruptive drone technology is spreading to many industries – oil and natural gas, agriculture and mining – just as tablets and “smart” technologies have done. There is an enormous number of opportunities for investors…

So we may not have “rocket mail,” but we do have email, instant messaging and a whole host of lightning-fast delivery technologies. In the future, the sound of the mail truck or delivery van may be replaced by the whir of a drone.

Good investing,