Mother nature’s wrath that does not discriminate, as we’ve seen by the recent trio of powerful hurricanes—Harvey, Irma and Maria—that have devastated the U.S. and the Caribbean since late August. Natural disasters leave a path of destruction, wreak havoc on people’s lives and take a mental, emotional and physical toll. In the aftermath, search and rescue missions ensue and the rebuilding begins.
Companies do not set out with a sole mission of operating only during and after natural disasters. Nonetheless, there are many industries that play key roles after a devastating storm or environmental disruption occurs. The recovery and clean-up efforts followed by the rebuilding phase tends to be costly and span many years, resulting in an unanticipated revenue boost for many companies. Accordingly, ETFs that focus on these industries should benefit.
Search And Rescue
Search and rescue entails some of the most difficult, capital intensive and often dangerous activities. New and more advanced technologies are transforming these tasks by increasing efficiency, speed of response and safety. The drone industry, for example, is one that local governments and companies turned to during and after the recent hurricanes to assist with search and recovery and environmental assessment.
The Red Cross employed its own fleet of drones to locate individuals in need. Insurance companies used drones to assess damage and stream live videos, making it easier and speedier to process claims. And mobile telephone companies sent out drones to assess cell tower damage and get communications online again.
“In some ways, the two hurricanes [Harvey and Irma] were a sea change for the commercial drone industry, as the general perception changed from military uses to drones that serve a purpose to mankind,” says Alan Phillips, CEO of DroneLife, an industry group. “In the immediate aftermath, drones were used in search and rescue because they were much more efficient to go in an evaluate where individuals needed rescue and provide a visual presentation of those situations by streaming live video.”
He adds that during the aftermath of those two hurricane drones also engaged in early-stage testing of a new function—delivering lifejackets and ropes to stranded individuals stranded, as well as materials to rescue teams.”
The ETFMG Drone Economy Strategy ETF (IFLY), which launched in March 2016, invests in global companies that operate drones and other unmanned aircrafts by tracking the Reality Shares Drone Index.
“Obviously the military use of drones in warfare is well-known, but now the use of drone for search and rescue in response to hurricanes Harvey and Irma has people taking notice,” says IFLY’s regional sales associate Stephen Gardner. “Initially the military use was interesting, but the expansion into commercial, for example with Amazon as a big potential user to deliver products, is even more compelling. It is that potential for broader application that is extremely attractive.”
The overall outlook for the drone industry looks promising, with forecasts calling for the commercial market to triple over the next seven years. The IFLY fund holds about 50 names, more than half of which are located in the U.S. The expense ratio of 75 basis points seems to be on the high side for a passive fund, but it has earned its pay in 2017 with a year-to-date return of slightly more than 33 percent as of September 25.