Pentagon may buy direct stakes in drone companies — get in early on defense drone stocks before the money lands
Drone stocks are soaring today after a report that the Trump administration is in talks to directly fund and take equity stakes in several U.S. drone companies. If it happens, it would be an unprecedented level of government backing for a small industry.
Idea
The Pentagon reportedly considering direct equity stakes in drone companies is a game-changer for a sector that has mostly relied on small defense contracts. Government funding would give these small companies real capital to scale and an implicit seal of approval that could attract private investors too. The news just broke today, so the full move likely hasn't played out — these are small, thinly-traded stocks that tend to run hard for several days on a catalyst this big. The main risk is that talks could stall or the policy gets scaled back, which would deflate the excitement quickly. Position sizing should be small given how volatile these names are.