Who Will Build America's Next Super Drone Fighter?

Lockheed Martin thinks it's found the right partner in AeroVironment.

Feb 10, 2014 at 1:15PM

Defense contracting giant Lockheed Martin (NYSE:LMT) builds both of the world's most powerful combat fighter jets, the F-22 Raptor and the F-35 Lightning II. But in the race to build unmanned aircraft, Lockheed has been a bit of a laggard.

Rival contractors Boeing (NYSE:BA), Textron (NYSE:TXT), and Northrop Grumman (NYSE:NOC) have enjoyed great success with their ScanEagle, Shadow, and Global Hawk drone aircraft, respectively. Yet, Lockheed to date hasn't developed a single unmanned aerial vehicle, or UAV, that has won significant sales success with the military. Rather, Lockheed's main claim to fame in the drone space has been its RQ-170 Sentinel  -- and that aircraft is most famous for getting hacked and captured by Iran!

But all that could soon change following a recent announcement from Lockheed.

Lockheed, meet AeroVironment. AeroVironment... Lockheed.
On Thursday, Lockheed announced it had signed a "memorandum of understanding" with one of the leading players in the UAV space. AeroVironment (NASDAQ:AVAV) is the company behind such well-known small UAVs as the Raven and Puma. It's also the company that developed the popular Switchblade guided-missile/UAV hybrid, as well as the Nano Hummingbird -- a small, aerodynamic UAV shaped like a real hummingbird.

AeroVironment Nano Hummingbird. Source: AeroVironment.

Initially, the companies say they will team up so that Lockheed can assist AeroVironment with its one sizable UAV, the high-altitude, long-endurance Global Observer drone. Farther out, though, the companies don't rule out jointly pursuing other projects in the UAV space.

Global Observer
AeroVironment's huge Global Observer at dawn. Photo: AeroVironment.

What it means to you
For shareholders of AeroVironment, this is big news -- and a big reason why AeroVironment shares rose 8% in the two days following Lockheed's announcement. As a small defense contractor with barely $210 million in annual revenue, AeroVironment is highly sensitive to small blips in defense spending patterns. Already, cuts in Pentagon budgeting have analysts, quoted on Yahoo! Finance, taking down the company's projected growth rate from 20% just a few months ago to just 14% today. A tie-up with a larger, more stable defense contractor like Lockheed Martin could be a real boon to AeroVironment.

On the other side of the coin, by joining forces with a recognized success story in the field of flying robots, Lockheed bolsters its own deficient exposure to the UAV sector. Farther down the road, Lockheed Martin could conceivably decide to buy AeroVironment -- with its $660 million market cap, it would be a small meal for Lockheed -- and give its own single-digit-growth rate a nice boost in the process.

AeroVironment's Switchblade could give Lockheed's growth rate a a shot in the arm. Photo: AeroVironment.

Psst! America has a secret weapon
Fighter jets are pretty neat. And drones are neater still. But what's the coolest weapons system of all? U.S. News and World Report says America has a secret weapon that "will drive the U.S. economy." Business Insider calls it "the growth force of our time." And in a special report titled "America's $2.89 Trillion Super Weapon Revealed," we'll tell you all about it -- and explain how to capitalize on this massive growth opportunity. Act now, because this is your shot to cash in before the fat cats on Wall Street beat you to the potentially life-changing profits. Click here now for instant access to this free report.

Rich Smith has no position in any stocks mentioned. The Motley Fool recommends AeroVironment. The Motley Fool owns shares of Lockheed Martin, Northrop Grumman, and Textron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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