AeroVironment (AVAV): Top Pick for Military Drones Investing

We recently released a list of the 10 Top Military Drone Stocks to Invest in Currently In this piece, we'll examine how AeroVironment, Inc. (NASDAQ:AVAV) measures up against some of the top contenders in the drone stock market.

Contemporary warfare is swiftly transforming beyond just involving soldiers, tanks, and fighter jets. Now, swarms of unmanned aerial vehicles (UAVs), controlled by artificial intelligence, dominate the airspace and can hit their objectives precisely. This shift in combat scenarios has merged human roles with those of machines, necessitating an overhaul of military capacities.

READ ALSO: 10 Nations Boasting the Highest Number of Military Drones Worldwide and Goldman Sachs' Recommended Defense Stocks: Leading 12 Choices .

Over recent years, the demand for drones has skyrocketed as nations increasingly employ Unmanned Aerial Vehicles (UAVs) for gathering intelligence, conducting reconnaissance, performing surveillance, and executing targeted missions. These airborne systems provide an unparalleled overhead perspective of combat areas, complicating efforts for adversaries to evade detection within conflict zones.

Unmanned aircraft systems played a significant role in the clash over the Nagorno-Karabakh area involving Azerbaijan and Armenia in 2020. These devices have also loomed overhead above numerous urban centers throughout the Russia-Ukraine conflict, prompting analysts to view them as an emerging challenge in air defense strategies.

For nearly a hundred years, the U.S. has utilized unmanned aerial vehicles (UAVs), starting with their deployment during World War II and most recently seeing action in conflicts such as those in Afghanistan and Iraq. In 2023, the Department of Defense (DoD) introduced Project Replicator, aimed at producing large numbers of 'attritable autonomous systems' within the following one-and-a-half to two-year period. Additionally, the Air Force is working on drone escorts designed to accompany its fighter planes and bombers through the Collaborative Combat Aircraft (CCA) project. Two initial prototypes of these CCA aircraft made their debut earlier this year in March.

Nonetheless, specialists in military defense see the increasing availability of drones as a security concern, noting that U.S. forces are facing greater attacks from non-government groups in the Middle East. Additionally, officials in Washington express concerns that China might take cues from Russia’s playbook during the Ukraine conflict and initiate comparable assaults on American assets in the Asia-Pacific region.

A significant amount of effort is being directed towards protecting nations from the dangers presented by unmanned aerial vehicles (UAVs). In October 2024, the Department of Defense (DoD) granted a $250 million contract to Anduril Industries for developing systems to defend against drone assaults targeting U.S. military personnel. As part of this agreement, the country will obtain 500 recuperative Roadrunner interceptor drones. These devices are designed as reusable aircraft capable of either neutralizing approaching drones or safely returning to earth if they do not engage their targets.

Given this introduction, let’s move on to the list of top drone stocks worth investing in.

A rocket ascending into the sky symbolizes the potency of the corporation's drone technology.

Methodology

We took stock samples from ETFs that have investments related to military drones, along with information from our earlier pieces on this topic. This group encompassed both companies solely focused on manufacturing military drones and larger defense firms that also run drone initiatives. Afterward, out of these selections, we picked the top 10 stocks which attracted the most hedge fund interest, according to Insider Monkey’s extensive record of more than 1,000 major hedge funds for the fourth quarter of 2024.

Why do we focus on the stocks that hedge funds amass? It's straightforward: our analysis indicates that mimicking the leading stock choices from premier hedge funds allows us to exceed market performance. Each quarter, our monthly bulletin chooses 14 small-cap and large-cap equities, yielding a return of 373.4% since May 2014, surpassing its benchmark by 218 percentage points. see more details here ).

AeroVironment, Inc. (NASDAQ: AVAV )

Number of Hedge Fund Owners: 24

AeroVironment, Inc. (NASDAQ:AVAV), which trades under the ticker symbol AVAV, specializes in developing unmanned aircraft systems as well as both ground-based robotic solutions and loitering munitions. Currently considered among the top picks for those interested in investing in drones, this company has seen significant gains; within just one month, its share price rose more than 15%, buoyed by various favorable updates recently.

On April 21, the Italian Ministry of Defense granted AeroVironment, Inc. (NASDAQ: AVAV) a five-year, $47 million agreement for their JUMP 20 vertical takeoff and landing (VTOL) unmanned aerial vehicle system. This contract encompasses the acquisition of these UAVs along with engineering assistance, preliminary maintenance, and on-site support. The JUMP 20 is characterized as a fixed-wing Unmanned Aircraft System (UAS), tailored specifically for sophisticated intelligence, surveillance, and reconnaissance operations. Equipped features include up to 30 pounds of carrying capability, a functional reach extending to 185 kilometers, and continuous flying duration surpassing 13 hours.

At the beginning of this month, shareholders of AeroVironment, Inc. (NASDAQ:AVAV) agreed to acquire BlueHalo LLC, a prominent player in space and defense engineering. This move aims to assist AVAV in broadening its range as global political conflicts continue across various regions.

Financial experts on Wall Street have expressed confidence in AeroVironment, Inc. (NASDAQ:AVAV), giving it a collective "Buy" recommendation along with an estimated potential for the share price to rise by about 36%. This positive outlook is fueled by the firm's latest moves such as acquiring BlueHalo and its strong standing within the industry, particularly due to anticipated growth in U.S. defense budgets.

According to Insider Monkey’s database for Q4 2024, 24 hedge funds held a stake in the company, improving from 22 at the end of the third quarter. Heard Capital Was the biggest shareholder in AeroVironment, Inc. (NASDAQ:AVAV) with stakes totaling more than $115 million as of December 31, 2024.

Overall, AVAV ranks 8th Among the top 10 Best Military Drone Stocks to Invest in Currently, we recognize the appeal these firms offer. However, our preference leans toward AI stocks due to their potential for superior returns over a shorter period. One particular AI stock has seen growth year-to-date despite many prominent AI shares dropping roughly 25% during the same timeframe. Should you be seeking an AI stock with stronger prospects compared to AVAV yet trading below five times its earnings, explore our detailed analysis of this opportunity. cheapest AI stock .

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Disclosure: No conflicts of interest. This article was initially published here. Insider Monkey .