Growth stock for the next decade?

It takes a smart investor to pick companies that can keep a healthy dividend stream going quarter after quarter, year after year, and I’ve talked about these with respect to being prepared.

But picking good long-term growth stocks should be an important part of your portfolio as well. The trick is to find good companies with good ideas that have proven their value to specific sectors and can translate their core competencies into niches that complement each other. That way, when one niche falters, the others pick up the slack.

They should have proprietary technologies and visionary leadership that can keep pace with a rapidly changing marketplace. If you rest on your laurels these days, it can mean you’re out of business — no matter what size company or market share.

Blackberry was the pinnacle of smart phone technology at one point. Where is it now? Nokia was the largest mobile phone maker in the world… and the list goes on.

Innovation spells solid long-term growth

I’m a firm believer in what I call “innovation investing.” Find innovators that can build a unique product and know how to get it to market and manage the business.

The future becomes the present very quickly these days and flexible, forward-looking companies that can quickly get the technologies from “lab to fab” (i.e., from the research stage into the product pipeline) will be the ones to thrive in the 21st century.

And as we have a perpetual war going on around the world, I wanted to remind you about one particular innovation investment, AeroVironment (AVAV), which is down a bit right now, so it’s ripe for a buying opportunity.

This isn’t a big company (around a $560 million market cap), but it has been working with big ideas for more than four decades. And that shouldn’t be a surprise given that the company’s founder, Paul MacCready, was one of the modern visionaries of the late 20th century.

MacCready became internationally known in 1977 as the “father of human-powered flight” when his Gossamer Condor made the first sustained, controlled flight by a heavier-than-air craft powered solely by its pilot’s muscles.

Two years later, his team created the Gossamer Albatross, a 70-pound craft with a 96-foot wingspan that achieved the first-known human-powered flight across the English Channel. It sits in the Smithsonian National Air and Space Museum in Washington.

In 1980, the Gossamer Penguin made the first climbing flight powered solely by the sun. In 1981, the rugged Solar Challenger was piloted 163 miles from Paris to England, at an altitude of 11,000 feet.

The AeroVironment team’s first land vehicle was the GM Sunraycer, with the company providing project management, systems engineering, aerodynamics, structural design and power electronics development, as well as construction and testing for General Motors (GM) and Hughes Aircraft.

In November 1987, this solar-powered car won the 1,867-mile race across Australia, averaging 41.6 mph (50 percent faster than the second place vehicle in the field of 24 contestants).

In January 1990, the GM Impact was introduced, a battery-powered sports car with snappy “0 to 60 mph in 8 seconds” performance. GM later turned the Impact into the production vehicle EV 1.

The innovation has not left the company even after MacCready’s passing in 2007.

The company is now a leader in small unmanned aerial vehicles (SUAVs, or today, just UAVs or drones) that have been used by special operations forces and forward deployed units around the world, including Iraq and Afghanistan. Yemen and Australia have recently purchased the company’s UAVs for their military.

The company continues to innovate and has UAVs as small as a hummingbird, or as large as the submarine-launched Blackwing UAV.

The company also has developed UAVs for law enforcement, homeland security and first responders. Putting these eyes in the sky keeps soldiers out of harm’s way until absolutely necessary and provides important information that keeps everyone informed and aware.

AVAV’s electric vehicle (EV) division is quite a departure from UAVs, but it’s the same innovative thinking and decades of expertise that have made it a growing profit center for AVAV.

Innovation on the ground

While consumer EVs aren’t a huge growth industry right now, there’s more to EVs than just cars. The biggest market now is industrial charging facilities. Forklifts and similar equipment run the floors of most major industries, and many of them were built with combustion engines. The growing trend is to convert these fleets to electric power, which saves money and space.

AVAV is a pioneer in electric charging stations and is well-known and respected with major manufacturers including GM, Ford and Toyota. And if EV cars grow into a significant niche, you can be sure AVAV will be one of the first to build the home and commercial charging stations.

Its third unit builds and manages power cycling and test systems to the world’s leading automotive, battery and fuel cell companies; utilities; universities; defense contractors; and government agencies. These systems are used for a wide range of testing, charging and development activities associated with advanced batteries, fuel cells, ultracapacitors, hybrid energy systems, motors, generators, uninterruptible power systems and powertrain components.

And its numbers reflect that, even in a tough economy, its diversification has helped it grow. Revenue for the first nine months of fiscal 2016 was $179.3 million, up 4 percent from the first nine months of fiscal 2015 revenue of $172.9 million, and that’s in a very slow-growth environment.

When U.S. consumers and companies can afford to upgrade to energy efficient and energy independent solutions again, this company will be firing on all cylinders.

Right now, however, analysts have discounted the stock because of slow growth. But there’s a big opportunity in the drone market for AeroVironment, so it might be the right time to buy into an innovative company with a history of finding the right side of technology and the ability to adapt and thrive. AeroVironment should be a long-term buy below $28 per share.

— GS Early

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