Asymmetrical Bets
· Asymmetrical Bets
· June 30, 2026 at 15:17
· ⏱ 6 min read
| Read on Substack ↗
Summary
Defense budgets are surging, especially for drones and counter-drone systems, driven by cost asymmetries in modern conflicts. The newsletter argues that the market has overcorrected by punishing defense stocks, creating asymmetric upside for companies exposed to Pentagon drone spending, even though no explicit positions are disclosed in the provided text.
•The DoW requested a $1.5T defense budget for 2027, a 42% increase over current levels; a locked-in $1.05T would still be a 17% YoY rise.
•Drone funding has stepped up from $10.1B in FY2025 to a requested $53.6B for 'Drone Dominance' in FY2027, with $20.6B for counter-UAS systems.
•Cost ratios are extreme: a $750 drone can destroy a $1.5M–$4.5M tank, and shooting down a $50,000 drone with a $3M Patriot missile is unsustainable.
•Key defense stocks (AVAV, KTOS, RHM) are down 50–62% from their highs despite the budget tailwinds, presenting what the author calls an 'asymmetrical buy opportunity'.
•The author cites Billy Mitchell's 1921 demonstration that cheap aircraft could sink battleships as an analogy for today's drone revolution in warfare.
•JPMorgan CEO Jamie Dimon is reportedly pushing a $10B investment plan into firms critical for national security, validating defense as an investable theme.
Author explicitly names AVAV as down 54% from highs despite 'home run earnings' and notes the stock is a popular drone/C-UAS company likely to benefit from the budget surge.
Author explicitly names AVAV as down 54% from highs despite 'home run earnings' and notes the stock is a popular drone/C-UAS company likely to benefit from the budget surge.
Risk: Valuation could remain depressed if market sentiment towards defense stays negative or if budget approval falls short.
Listed alongside AVAV and RHM as down 62% from highs, Kratos is a key drone and counter-drone supplier with direct exposure to Pentagon spending on autonomous systems.
Listed alongside AVAV and RHM as down 62% from highs, Kratos is a key drone and counter-drone supplier with direct exposure to Pentagon spending on autonomous systems.
Risk: Execution risk on large defense contracts and potential competition from new entrants.
Rheinmetall (RHM) is mentioned as down 50% from highs, a major European defense contractor involved in drone and counter-drone systems amid global budget increases.
Rheinmetall (RHM) is mentioned as down 50% from highs, a major European defense contractor involved in drone and counter-drone systems amid global budget increases.
Risk: Geopolitical exposure and currency risk; European defense budgets may not ramp as aggressively as US.
This newsletter, published June 30, 2026,
features Asymmetrical Bets
discussing AVAV, KTOS, RHM.
3 trade ideas extracted by AI with direction and confidence scoring.