Thematic Investing Takes Flight: An Inside Look at eToro's DroneTech Smart Portfolio

Key Takeaways

• eToro's DroneTech Smart Portfolio provides exposure to companies involved in drone technology and unmanned aerial vehicles (UAVs)
• It includes stocks from major drone makers as well as companies using drones commercially across industries like delivery, agriculture, and infrastructure inspection
• The portfolio is actively managed by eToro's analysts to adapt to changes and opportunities in the rapidly evolving drone market
• Investing in the DroneTech portfolio allows you to capitalize on the growth potential of the drone industry without having to research and pick individual stocks
• As with any investment, it carries risks, but the portfolio is diversified across multiple drone-related companies to help mitigate that

An Introduction to Drones and the DroneTech Portfolio

Drones or unmanned aerial vehicles (UAVs) have gone from a military technology to a consumer craze to a transformative force disrupting countless industries. What started as expensive toys for hobbyists is now a multi-billion dollar market, with drones being used for everything from filming movies to delivering packages to inspecting power lines.

The growth potential is massive, which is why eToro created the DroneTech Smart Portfolio - to allow investors to easily get exposure to this booming sector. But what exactly is in this portfolio? And is investing in drone stocks a good idea? Let's take a closer look.

What Companies Are in the DroneTech Portfolio?

The DroneTech portfolio contains around 30 stocks related to the drone industry. This includes:

• The major drone manufacturers like DJI, Parrot, and AeroVironment
• Drone software and services companies like Airmap and PrecisionHawk
• Companies using drones commercially across sectors like e-commerce (Amazon), agriculture (John Deere), and infrastructure inspection (Lockheed Martin)

So it's a pretty diverse mix of pure-play drone companies as well as large corporations leveraging drone tech. The stocks are weighted based on their relevance to the drone theme, with the major manufacturers and drone-focused firms making up a bigger slice.

Why Invest in Drone Stocks?

Okay, but why would you want to invest in this sector in the first place? A few key reasons:

1) Massive growth potential - The drone market is projected to grow from around $30 billion in 2020 to over $90 billion by 2030. That's a huge runway for expansion.

2) Disrupting countless industries - Drones are being used more and more for commercial applications that increase efficiency and reduce costs. From filming to deliveries to inspections, they are transforming how business gets done.

3) Regulatory tailwinds - Regulators around the world are gradually opening up more airspace and use cases for commercial drone operations, removing barriers to growth.

4) Technological advances - Drones are getting smarter, more autonomous, and able to fly longer distances. This unlocks new capabilities and markets.

So in short, the drone industry checks a lot of boxes for an attractive investment opportunity - high growth, disrupting multiple sectors, regulatory support, and consistent innovation. Of course, not every drone company will be a winner, which is where eToro's Smart Portfolio approach comes in handy.

The Benefits of the Smart Portfolio Approach

Rather than trying to pick individual drone stocks as a regular investor, the DroneTech portfolio essentially lets you invest in the drone megatrend itself. Here are some of the key benefits:

Diversification - With around 30 stocks spanning different segments of the drone ecosystem, the portfolio is well-diversified to reduce company-specific risks.

Actively managed - eToro's analysts constantly monitor the portfolio, adding or removing stocks as the drone landscape shifts to optimize for growth.

Thematic investing - Instead of broad market exposure, you get targeted investment into the specific drone technology theme you're bullish on.

Convenience - No need to spend hours researching individual drone companies. The portfolio does that work for you based on eToro's analysis.

Low fees - The portfolio has no direct management fees, just the trading costs for the underlying assets it holds.

Of course, the tradeoff is that you don't have full control over the individual investments like you would if you built your own drone stock portfolio. But for most investors, the DroneTech Smart Portfolio likely represents a simple, low-cost way to invest in this megatrend.

Risks to Consider

Like any investment, the DroneTech portfolio does carry some risks to be aware of:

• Concentration risk - Being focused solely on the drone industry means it won't be diversified across other sectors
• Competitive risk - New players could emerge and disrupt the incumbents in the portfolio
• Regulatory risk - If commercial drone regulations tighten again, it could stunt industry growth
• Execution risk - Not all drone companies will be able to successfully capitalize on the opportunity

However, the portfolio approach does help mitigate these risks compared to betting on just one or two drone stocks. eToro's analysts aim to identify and invest in what they view as the best-positioned drone companies while diversifying across different segments.

The Potential of Drone Delivery

One particularly exciting area within the drone space is delivery via unmanned aerial vehicles. The idea of having drones drop off your Amazon order or Chipotle burrito seems like science fiction, but it's rapidly becoming reality.

Companies like UPS, FedEx, Alphabet (Wing), and Amazon are all actively testing drone delivery to reduce last-mile costs and increase delivery speed. Walmart has even filed patents around drone delivery of grocery orders.

Of course, there are still regulatory hurdles around flying drones over populated areas. But as the technology advances and public acceptance grows, it's easy to envision a future where drone delivery for certain items becomes the norm.

The DroneTech portfolio has exposure to many of the key players in this space, both the drone makers themselves and the logistics giants implementing the technology. So it's a way to invest in this transformative use case for drones.

Drone Applications in Agriculture and Infrastructure

Beyond delivery, drones are also being leveraged in agriculture, energy, and infrastructure inspection in really innovative ways:

Agriculture

• Drones can survey crop health, spray fertilizers, and even assist with planting
• Companies like John Deere are integrating drone tech into their precision agriculture solutions

Energy

• Drones can inspect power lines, wind turbines, pipelines, and solar farms for damage
• This is faster, cheaper, and safer than human inspection crews

Infrastructure

• Drones can survey roads, bridges, railways, and construction sites
• Their data helps with maintenance planning and progress monitoring

The DroneTech portfolio has exposure to companies operating in these verticals, either as the drone providers or the ones deploying the technology. It's a way to invest in drones disrupting these traditional industries.

The Drone Racing and Filming Opportunity

On the more consumer/entertainment side, drone racing is becoming a legitimate sport with professional leagues and corporate sponsors. The ability of racing drones to fly at high speeds through complex courses is attracting audiences.

Similarly, drones are being used more and more for filmmaking due to their maneuverability and ability to get shots that would be impossible for traditional cameras. Many Hollywood blockbusters now utilize drone footage.

While not the core focus, the DroneTech portfolio does contain some exposure to companies involved in the drone racing and filmmaking spaces as well. It's a way to invest in the cultural proliferation of drones beyond just the commercial/industrial use cases.

Military Drones and the Future of Unmanned Systems

We'd be remiss not to mention the original use case that kicked off the drone revolution - military applications. While the DroneTech portfolio is focused on commercial/civilian drones, many of the companies involved also have exposure to military contracts.

The future of unmanned systems for intelligence, surveillance, and combat operations is a massive market in itself. As artificial intelligence and swarming technologies advance, we could see drone swarms working in coordination on the battlefield.

So while not the direct focus, the drone tech being developed for commercial markets will likely have military crossover applications as well. Investing in the DroneTech portfolio is a way to get exposure to the innovators helping shape this future.

Conclusion

The eToro DroneTech Smart Portfolio provides a compelling way for investors to get exposure to the rapidly growing drone industry and its transformative applications across multiple sectors. By including a basket of drone manufacturers, service providers, and companies leveraging the technology, the portfolio aims to capitalize on the drone megatrend in a diversified way.

Of course, as with any investment focused on an emerging technology, there are risks around regulation, competition, and execution. But for those bullish on the drone revolution disrupting industries from delivery to agriculture to infrastructure inspection, the DroneTech portfolio represents a convenient, low-cost way to invest in that future.

Whether you're a drone enthusiast looking to invest in what you're passionate about or simply an investor interested in a high-growth space, the DroneTech Smart Portfolio is definitely worth a look. As drones take to the skies in more and more applications, this could be your way to soar alongside them.