"There are those that see JSF as the last manned fighter. I'm one that's inclined to believe that."
-- Adm. Michael Mullen, chairman of the U.S. Joint Chiefs of Staff
"The solution to future threats is not something that has a pilot in it."
-- Defense Secretary Bob Gates
But today we're going to flip that story 90 degrees, and take a turn for the vertical. You see, as fast and furious as unmanned, horizontal-flying aircraft have evolved, the big story in recent months has been the advances going on in robotic helicopters. Just a few days ago in fact, Army General Peter Chiarelli argued that within the next 25 years, U.S. Army aviation will go almost entirely robotic.
The Army has already put fixed-wing Ravens from AeroVironment
First up, United Tech
Quick: When you think U.S. Army aviation, what's the first bird that flies to mind?
That's right: United Technology's (UTC)
Batter up, Boeing
It's an attractive proposition, you must admit. So attractive, in fact, that Boeing
UTC, Boeing … anyone else want to play this game?
As a matter of fact, yes. Within the field of robotic helicopters, UTC's the one grabbing headlines, and Boeing is building, but Northrop Grumman
Earlier this year, Northrop began expanding the Fire Scout's theater of operations onshore as well. The company demonstrated the helicopter's ability to autonomously resupply ground troops at the Army's Expeditionary Warrior Experiment at Fort Benning. Similarly, Lockheed Martin
Where's the shootin' end?
But perhaps bored at the prospect of building an aerial luggage packer, Lockheed's not stopping with the K-Max. Just days ago, the news came out that Lockheed has decided to partner with archrival Boeing's other archrival, European EADS, to build a shootin' chopper for the Army.
In cooperation with EADS' American Eurocopter (an oxymoron if ever I saw one), Lockheed is developing three AAS-72X helicopters on spec, hoping to prove to the Army that can build helicopters that fly, chew gum, and blow stuff up all at the same time. Based on Eurocopter's UH-72A Lakota design, which is replacing the Army's fleet of UH-1H Hueys built by Textron
Execute a 360
... because now we come full circle. You see, the ultimate goal of the AAS program is to replace the Army's fleet of OH-58 Kiowa scout helicopters with a partly or wholly unmanned fleet; one that will perform not just the kind of resupply ops for which the K-Max copter was designed, but actual "reconnaissance and strike" missions. This argues in favor of Lockheed's AAS evolving into a truly robotic helicopter -- just as General Chiarelli promised.
Your Foolish investing takeaways
So, what does all this mean to you, the investor? Three things:
- First, we're at the very beginning of a long-term, and lucrative, upgrade cycle in military hardware. Across the spectrum, from planes to tanks to helicopters, the military is just wild about robots.
- Second, the defense contractors are moving to fill that need, to satisfy their customers' desires -- and as the upgraded sticker price on UTC's Black Hawk shows, they're adding in a tidy profit margin for the service.
- Third and finally, here at the beginning of this lucrative upgrade cycle, defense stocks are -- literally across the board -- selling for extremely attractive multiples to earnings and free cash flow.
Now, I don't mean to beat a dead horse here, robotic or otherwise. But it seems to me, now's a great time to buy this trend.