One of the closely followed gurus on this site is Dr. Phillip Frost who maintains an extraordinary investment track record. Dr. Frost earned 1300% in North American Vaccine, 900% in Continucare, 650% in Dreams, 2800% in Whitman Education, 3500% in Key Pharmaceuticals, 580% in Rolapitant and 1400% in Ivax. Dr. Frost's home city of Miami is filled with buildings bearing his name as benefactor, including the Frost Museum of Science, Frost School of Music, Frost Art Museum and his Ivax tower that still displays Dr. Frost's original marquee years after he earned its $7+ billion acquisition.
Dr. Frost now spends the vast majority of his time at Opko Health (NYSE: OPK), the $3.5 billion company he founded and still operates as CEO, yet he makes occasional investments to diversify his portfolio. A proven visionary, Dr. Frost has made fortunes investing in small-cap companies that eventually become large-cap successes. One of the trends he is betting on with personal money is drones.
I have been fascinated by the drone space and have been looking for a reasonable investment, but I found very few drone companies in existence. Worse, most of the public drone stocks have already outrun investors looking for an early advantage like me.
- AeroVironment (NASDAQ: AVAV) has already rallied 46% from $28.17 to $41.39 this year.
- Spirit AeroSystems (NYSE: SPR) has already rallied 19% this year.
- California-based DIY Drones is already seven-figure profitable and not for sale, according to a recent CEO interview.
- China-based SZ DJI Technology and XAircraft are also profitable and not for sale, selling over $200 million of drones combined this year.
- Google (NASDAQ: GOOG) has already acquired drone maker Titan Aerospace.
- Facebook (NASDAQ: FB) has already acquired U.K.-based Ascenta.
With so few options, I gave up until I reexamined my gurus' portfolios and saw Dr. Frost's relatively new investment in Drone Aviation Holding Corp. (DRNE, Financial). Happy to see a drone stock price that had not already doubled – and was actually near Dr. Frost's cost basis – I decided to dig deeper.
In brief, Drone Aviation Holding Corp. is a pure-play drone company wholly focused on selling tethered drones. The company is a trusted supplier of aerial surveillance and communication drones to various branches of the Department of Defense as well as State and local civilian and commercial entities. It develops and sells complete, turn-key, tethered surveillance systems based on its own proprietary technology.
Drone Aviation Holding Corp. sells tethered drones, or drones that are physically connected to a ground unit through a line or cable. Its most popular drone is (helium) balloon-based and is connected to the bed of a mobile truck unit. Tethered drones are not "free-flying" and therefore comply fully with all FAA regulations, including avoiding the airspace restrictions that plague free-flying drones. The tether also provides power, telecommunications, and an assortment of other technological advantages that dwarf the capabilities of free-flying drones.
Below is a picture of its military-grade, balloon-based drone that is designed to relay communications in remote areas. (I immediately contrasted this drone with the flimsy GoPro quadcopters that struggle to fly for more than 15 minutes.)
Revenue growth
Quarterly revenue growth increased by 331%, which is the startup-style growth that I expect from a small-cap company that recently added a billionaire to its Board. Insiders own over 34%, and there are just 32 million shares outstanding, making Drone Aviation Holding Corp. an attractive low-float play with plenty of revenue catalysts in 2015.
Customers with trillions
The U.S. Army is the most recent customer of Drone Aviation Holding Corp. Other customers include ADS Inc., a U.S. government prime contractor, Ohio Department of Transportation, and the U.S. Department of Defense. I could not be more happy with the quality (and bankroll) of these customers. I also found pending sales negotiations on Drone Aviation Holding Corp.'s website involving NASA, U.S. Bureau of Land Management, U.S. Department of Agriculture, and several state and municipal agencies.
Conclusion
Like everyone, I expect drone technology to demonstrate explosive growth over the next couple of years, but I have struggled to find a reasonably priced investment that has not already left the proverbial station. Fortunately, Dr. Frost has alerted me to a fairly (indeed, attractively) priced company, Drone Aviation Holding Corp., which is a pure drone company with some of the world's largest governmental agencies as paying customers.
I expect to see significant share price appreciation in 2015 as investors become aware of this attractive stock and as Dr. Frost begins working his magic, as he always does with his small-cap investments. Revenue growing in triple digit percentages is always nice, too. I believe this will be one of my biggest and easiest wins over the next 12 months.
