Along with other some other thematic exchange traded funds, the ETFMG Drone Economy Strategy ETF (NYSEARCA: IFLY) was drubbed last year, but the first ETF dedicated to drone-focused stocks is rebounding in 2019.
Entering Monday, IFLY had a year-to-date gain of almost 11%. IFLY tracks the the Reality Shares Drone Index (RSD), a basket of companies determined based on a combination of Projected revenue from drone technology; Direct involvement in developing or researching drone technology; Services provided to companies directly involved in drone technology; and the expected growth of a company’s revenue from drone technology.
“In December, the technology was in the headlines when suspected drone sightings grounded flights at Gatwick Airport in the U.K. While such incidents paint the industry in a bad light, the broader story is more positive, says Robert Saffer, global head of ETF sales at ETFMG,” reports Gerrard Cowan for the Wall Street Journal.
There are myriad uses for drone technology, a factor that could be a boon for IFLY over the long-term.
“Industrial drone usage includes emergency services, agriculture, military, construction, real estate,” according to ETFMG. “Changes in regulation has paved the way for the proliferation of drone usage.”
Investigating IFLY ETF
IFLY holds 53 stocks, nearly 60% of which hail from the aerospace and defense sectors. Technology stocks, including semiconductor names, are also well-represented in the fund.
“IFLY tracks an index of global companies with exposure to the drone industry, such as AeroVironment Inc., Boeing Co. and Parrot SA. Because IFLY invests in companies in the broader drone ecosystem, it also could benefit from increased interest in counter-drone technologies, driven by incidents such as the one at Gatwick, Mr. Saffer says,” according to the Journal.
The Federal Aviation Administration expects the number of drones in civil airspace to quadruple to 450,000 by 2022. While the U.S. military is the dominant drone user today, the technology has applications across industries, including agriculture, retail, real estate and more.
“Mr. Saffer says many of IFLY’s investments are concentrated on smaller companies, which were particularly hard hit by last year’s market turmoil. This performance doesn’t reflect the growth prospects of the industry, he says,” according to the Journal.
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