We recently published a list of the 10 Best Military Drone Stocks to Buy Now. In this article, we will take a look at where AeroVironment, Inc. (NASDAQ:AVAV) stands against other best drone stocks.
Modern warfare is rapidly evolving from being the sole domain of soldiers, tanks, and fighters. Swarms of UAVs, guided by artificial intelligence, now fill the skies and can strike enemy targets with pinpoint accuracy. This revolution in warfare has blurred the lines between man and machine, resulting in a need for reassessment of military capabilities.
READ ALSO: 10 Countries with the Most Military Drones in the World and Goldman Sachs Defense Stocks: Top 12 Stock Picks.
The demand for drones has surged over the last few years, with countries actively using UAVs for intelligence, reconnaissance, surveillance, and target operations. These aerial vehicles offer a bird’s eye view of the battlefield, making it difficult for targets to move and hide from the conflict zone.
Drones were a prominent feature of the conflict in the Nagorno-Karabakh region between Azerbaijan and Armenia in 2020. They have been clouding the skies across several towns and cities during the Russia-Ukraine war, which defense experts see as the arrival of a new threat in the aerial defense space.
The US has been operating drones for about a century, having first deployed them during World War II and more recently during the wars in Afghanistan and Iraq. In 2023, the Department of Defense (DoD) announced Replicator, an initiative to build ‘attritable autonomous systems’ in mass over the next 18-24 months. Moreover, the Air Force is developing drone wingmen to fly alongside its fighter and bomber jets under the Collaborative Combat Aircraft (CCA) program. The first two CCA fighters were unveiled in March this year.
However, defense experts view the proliferation of UAVs as a security threat, with American troops increasingly coming under attack from non-state actors in the Middle East. Policymakers in Washington also worry about China getting a leaf out of the Kremlin’s book (Ukraine war) and launching similar strikes against US interests in the Pacific.
Much work is going into guarding countries against the threats posed by UAVs. In October 2024, the DoD awarded a $250 million contract to Anduril Industries to counter drone attacks against American forces. Under the contract, the US will receive 500 recoverable Roadrunner interceptors, which are reusable drones that can intercept incoming drones or land back on the ground if they are not engaged.
With that said, let’s head over to the list of the best drone stocks to buy.
A rocket on its way to the sky, representing the power of the company’s unmanned aircraft systems.
Methodology
We sampled stocks from ETFs with exposure to military drones and our previous articles on the subject. Both pure-play military drone makers and defense contractors with drone programs were included in our pool. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 1,000 prominent hedge funds as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 24
AeroVironment, Inc. (NASDAQ:AVAV) designs and manufactures unmanned aerial vehicles, ground robot systems, and loitering munition systems. It is one of the best drone stocks to buy right now, with the stock having returns of over 15% in the past month on the back of several positive recent developments.
On April 21, the Italian Ministry of Defence awarded AeroVironment, Inc. (NASDAQ:AVAV) a five-year, $47 million contract for its JUMP 20 VTOL medium uncrewed aircraft system. The contract will include the procurement of these drones, engineering services, initial sustainment, and onsite support. JUMP 20 is a fixed-wing UAS, designed for advanced ISR missions. It boasts 30 pounds of payload capacity, an operational range of 185 km, and flight endurance of over 13 hours.
Earlier in the month, AeroVironment, Inc. (NASDAQ:AVAV)’s stockholders approved the acquisition of BlueHalo LLC, a leading space and defense engineering company. The transaction is expected to help AVAV further expand its portfolio amid ongoing geopolitical tensions in different parts of the world.
Wall Street analysts are bullish on AeroVironment, Inc. (NASDAQ:AVAV) with a consensus Buy rating and an average share price upside potential of 36%. Their optimism around the stock stems from the company’s recent strategic initiatives like the BlueHalo acquisition and its current position in the sector, with America’s defense spending expected to increase ahead.
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 largest investor in AeroVironment, Inc. (NASDAQ:AVAV), with holdings of over $115 million as of December 31, 2024.
Overall, AVAV ranks 8th among the 10 Best Military Drone Stocks to Buy Now. While we acknowledge the potential of drone companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than AVAV but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
