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We hope this email finds you safe, comfortable, and looking forward to a fun, extra-long Independence Day weekend. Unfortunately, one of the biggest travel and cookout times of the year is coinciding with severe thunderstorms, power outages, and flight cancellations in a large swath of the country, a dangerous heat wave in the South (it’s solar energy’s moment to shine), hazardously poor air quality in the Midwest and Mid-Atlantic, and more bizarre headlines about a tech CEO cage fight in the West that we thought (ok, hoped) was fake news. ICYMI, we have primers on investing for green cooling and extreme weather, and while we did not think we would say this when we started FWIW, we will fill you in on the impact of mixed martial arts on corporate governance if it ever becomes relevant to your investing journey.
Two new data releases that point to a resilient economy lifted the stock market earlier this week. The American consumer is feeling confident, and data shows the housing market recovering despite high mortgage rates. But the Fed chief’s comments about more interest rate hikes cooled the bullish optimism. Here’s what else we’re watching in the world of business and finance:
- First rule of ESG? You do not talk about ESG: Speaking at the Aspen Ideas Festival, BlackRock CEO Larry Fink said he doesn’t use the term anymore since it’s been “politicized and weaponized,” but he still believes in what it stands for and its relevance to long-term investing. Similarly, reports suggest companies are still going ahead with decarbonization, diversity, and other sustainability initiatives amid the backlash but are saying less and avoiding three-letter acronyms.
- Headwinds: Siemens, one of the largest wind turbine makers in the world, has found quality issues in 15–30% of its installed fleet and begun a $1 billion technical review. They really blew it. This is another setback for the struggling wind energy industry that has been plagued by supply chain issues and losses.
- Semiconductor slump: The US may curb exports of AI chips to China. This news, which sent shares in US chip giants like Nvidia and Chinese tech companies like Alibaba lower, comes as US manufacturers gain access to billions of dollars in federal subsidies under the 2022 CHIPS and Science Act.
- Banks aren’t stressed: The Fed’s annual test to check the strength of the country’s 23 large banks revealed they are well positioned to weather a severe recession. This will be a relief to investors worried about the banking system’s shaky nature after the failure of three lenders this year.
As we near the end of the second quarter, experts continue to mention the possibility of a recession exists even as chatter of a new bull market picks up. Expect many debates about the market’s direction for the second half of 2023, and keep in mind the benefits of a long-term mindset. Today, we’ll transport you much further into the future with a look at unmanned aerial vehicles, AKA drones, and their potential to change the world (and create fun formations in the night sky to gawk at).
Note: We will be taking a break next week and not publishing FWIW. If you find yourself needing a fix, our archives are always open to explore and learn about something new.
News you can use
- Delta just defined why it feels like everyone on your social media feed is traveling right now. The airline has lifted its earnings forecast for both the second quarter and full year based on robust demand. The International Air Transport Association (IATA) also reported that forward bookings for the May–September travel season are 35% above 2022 levels. Naturally, travel-focused stocks and the funds that hold them, like the US Global Jets ETF, Defiance Hotel Airline and Cruise ETF, and ALPS Global Travel Beneficiaries ETF, have had a very strong month.
- The climate effort will take more than the sun and the wind, said the International Renewable Energy Agency (IRENA). According to its 2023 outlook that warns the energy transition is “off-track,” most renewable energy investments are going toward solar photovoltaic and wind power, and greater volumes of funding need to flow to other technologies “such as biofuels, hydropower, and geothermal energy, as well as to sectors beyond power such as heating and transport.”
- The term “ESG” may be taboo, but investors are finally getting a set of global ESG reporting standards. The International Sustainability Standards Board just released a voluntary framework that will give companies a standard way to disclose environmental, social, and governance info. Companies can start applying the framework next year, so expect to start seeing it in financial reports in 2025. In the meantime, here’s an overview of the ESG standards and frameworks in place today.
Asking for a friend….
We know there is a lot to think about these days, and it can sometimes be a bit overwhelming. To help with those nagging questions, and so you have useful resources at your fingertips, here are a few links to resources and past stories relevant in these turbulent times:
- FWIW’s Guide to Long-Term Investing
- Where should I put my money in a high-interest-rate world?
- FWIW Guide to Cleantech Investing: Sectors to Watch (covering over a dozen innovative sectors to anchor your research on sustainable investing options)
- Some of our favorite inflation-fighting strategies (and a few more)
- How to Practice Faith-Based Investing
- “Siri, What Is a Recession?”
Soaring high with drones
If you caught the jaw-dropping drone show that opened the Beijing Winter Olympics in 2022, you’ve seen at least one way drones are impressing people around the world. While your local 4th of July celebration may not feature drones yet, there are plenty of practical (yet still creative) uses for drones, AKA unmanned aerial vehicles (UAVs). From package delivery to wind farm monitoring, drones are playing a key role in our transition to a lower-carbon future.
As innovators discover more applications and advance drone technology, the market is booming. The US Federal Aviation Administration (FAA) forecasts that the commercial small drone fleet (which includes aircraft up to 55 pounds) will increase from 727,000 in 2022 to around 955,000 by 2027. It also expects the number of large drones registered in its Public Aircraft Registry to increase tenfold by 2027, reaching nearly 13,000.
How drones support a safe, sustainable world
Drones can contribute to many efforts to create a safer and more sustainable future. Following are a few areas where the tech is making a positive impact:
- 🌱 Sustainable farming: Drones are transforming agriculture, helping farmers with jobs like crop monitoring, soil analysis, seed planting, and precision application of fertilizers and pesticides. They can even serve as modern scarecrows — The Drone Bird Company developed a fleet of drones that look like birds of prey to scare away unwanted smaller birds.
- 📦 Last-mile delivery: If you’ve ever had your parking spot or bike path blocked by a delivery truck, you may appreciate the potential of drones to alleviate the emissions and traffic jams created by our online shopping habits. Drones use up to 94% less energy per package than other vehicles, resulting in 84% fewer CO2 emissions, according to a Carnegie Mellon study. Companies like UPS and Walmart are experimenting with drones to efficiently get rotisserie chickens, ice cream, and paper towels into consumers’ hands.
- 🚑 Life-saving medical treatments: Drones aren’t just delivering lunch and snacks. The Rwandan government has been partnering with San Francisco-based Zipline since 2016 to quickly shuttle blood to rural hospitals, helping patients in critical need of transfusions. In Sweden, a drone delivered a defibrillator to the home of a man who went into cardiac arrest while shoveling snow, helping to save his life even before an ambulance could reach him.
- 🧑🚒 Public safety: Drones equipped with sensors, thermal imaging, and high-resolution cameras are aiding in search-and-rescue operations, disaster management, and infrastructure inspections. The high-flying devices can even protect swimmers from sharks, monitor air quality, study tornados, fight fires in urban high-rises, and provide timely intel on fickle wildfires.
- ☀️ Renewable energy operations: Energy companies are using drones to operate renewable energy developments more efficiently, such as for monitoring wind turbine blades and cleaning solar panels of dirt and debris.
- 🌳 Environmental conservation: Drones play a crucial role in documenting deforestation, monitoring the melting of ice caps, planting trees, tracking wildlife, and many more conservation efforts around the world.
- 🚁 Emission-free transportation: A Jetson-like city full of flying cars may be in the distant future, but companies are already testing drone technology that could lead us there. Last year, the German manufacturer Volocopter flew its electric drone taxi in air traffic for the first time. The company hopes to offer commercial flights in 2024.
Drone stocks and funds to watch
While many innovative drone companies are not publicly traded, there are lots of opportunities to gain exposure to this sector. We don’t recommend stocks in this newsletter, but the following are a few companies and ETFs you may consider researching:
- Drone hardware manufacturers: For pure-play drone stocks, a few of the big players include AeroVironment, Airobotics (owned by Ondas Holdings), Draganfly, Drone Delivery Canada, and Parrot.
- Passenger drone companies: You might see passenger drones referred to as vertical take-off and landing (VOTL) aircraft or eVOTLs (the e means the craft is all-electric). Publicly-traded companies specializing in this area include Blade Urban Air Mobility, EHang, Eve Air Mobility, and Joby Aviation.
- Tech and aerospace companies: Many established companies see potential in the drone market. Amazon’s Prime Air and Alphabet’s Wing subsidiary aim to be major players in the delivery space. Microsoft recently rolled out simulation software to train drone AI systems, and Boeing produces drones under its Insitu subsidiary. Several companies also manufacture components of drones, like Ambarella Inc., which makes video processing chips, and Teledyne FLIR (a subsidiary of Teledyne Technologies), which specializes in thermal imaging technology.
- Drone funds: Drones are still an emerging technology, so it can be risky to place all your bets on one company. Exchange-traded funds can help you balance risk by investing in a basket of stocks. Although the one ETF focused solely on drones (AdvisorShares Drone Technology ETF) stopped trading earlier this month, many aerospace and technology-focused ETFs hold drone stocks, like the SPDR S&P Kensho Final Frontiers ETF and the Invesco Aerospace & Defense ETF.
Navigating the drone landscape
If the image of drones buzzing over your peaceful summer barbeque or bothering nesting birds is not your cup of tea, you’re not alone. There are real concerns around the proliferation of drones, and while they hold tremendous promise, they also pose safety, legal, and privacy concerns. Consider, for example, the use of drones in national defense. While some experts will point out the life-saving benefits of using drones to deliver medical aid, food, and supplies to soldiers on the front lines, drones in warfare also may spark ethical concerns for some values-aligned investors. If you’ve seen this scene in Spider-Man: Far from Home, you can imagine the destruction an army of drones can cause when under a villain’s control.
Even for practical applications closer to home, like food delivery, drone companies still need to overcome safety and legal hurdles. The FAA requires that drones be flown within the operator’s line of sight (clearly not practical for delivering packages throughout cities), although commercial operators can apply for waivers.
Like any investment, you’ll want to assess individual companies to determine which ones are proving commercially viable and align with your personal values. While drones are an emerging market (as you can see from the focus on ETFs and the limited number of publicly traded drone-specific companies), some experts say the sector looks poised to soar.
Before you go -
If your long weekend plans include pickleball… 🤕 Caution on the court — pickleball injuries may cost Americans $377 million this year. We just want everyone to have a safe and fun holiday!
** FWIW team members own shares of Alphabet, Amazon, Microsoft, and Walmart.