REX Drone ETF (DRNZ) September 2026 Commentary
REX Drone ETF (DRNZ) | September 2026 Commentary
Key Highlights
September Performance (NAV)
DRNZ
S&P 500 Index
YTD Performance (NAV)
DRNZ
S&P 500 Index
For current standardized performance, click here.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Performance current to the most recent month-end can be obtained by calling 1-844-802-4004. Short term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns.
The fund’s gross expense ratio is 0.65%.
- The month’s loss was broad: only 7 of 45 names were up, and the median stock return was −7.5%. Winners added +2.41 points and losers took away −7.43.
- Two stocks provided most of the gains. Next Vision (+11.5%, +1.24 pts) and Terra Drone (+12.0%, +0.63 pts) together added +1.87 points, more than three-quarters of everything the winners contributed. Next Vision flipped from August’s biggest drag to September’s biggest contributor.
- US-listed small-cap drone makers were the biggest drag. Red Cat (−1.09), Swarmer (−0.75), Aevex (−0.48), ZenaTech (−0.45) and AIRO (−0.20) took away −2.97 points combined. Only Draganfly (+0.25) and Unusual Machines (+0.17) bucked the trend, even as last month’s drone tariffs took effect September 3.
- The three largest positions were roughly a wash. AeroVironment, Ondas and Next Vision are 36.2% of the fund and together added +0.18 points. Next Vision’s gain offset AeroVironment (−0.55) and Ondas (−0.51), both down about 4%.
- The large-cap defense and aerospace names fell harder as a group. These 24 names are about 17.5% of the weight and cost −1.45 points; only Embraer rose. The worst were Axon (−25%), Rheinmetall (−16%) and Kratos (−16%), while the US primes (Lockheed, Northrop, RTX, L3Harris) fell roughly 9-11%. The drone-focused holdings, about 82% of the weight, cost −3.57 points, though as a group they fell about half as much (−4.3% vs. −8.3%).
Portfolio weightings above reflect holdings as of August 31, 2026.
September in review
Commentary
September was a month in which the demand side of the drone thesis kept advancing, but the market’s tolerance for valuation, dilution and execution risk fell sharply. A Fed rate hike, a Middle East de-escalation trade and midterm-election budget worries arrived at once, and they hit hardest where valuations depend most on future scale.
- The macro backdrop turned against the fund’s highest-multiple holdings. Treasury yields jumped at the start of the month, and Axon fell 8.5% on September 1 alone. On September 16 the Fed raised rates by a quarter point to 3.75%-4.00%, its first hike since July 2023, and signaled another increase before year-end. For companies with modest revenue today, a higher discount rate matters more than any single contract headline.
- Military demand kept moving from strategy into procurement, but it did not flow evenly to public companies. On September 15 the Pentagon’s Drone Dominance Program named its Gauntlet II top performers, from whom it plans to buy about 60,000 one-way attack drones; none is a fund holding. AeroVironment reported record first-quarter revenue of $480.5 million, $683 million of bookings and a record $1.5 billion funded backlog on September 9, yet faded with the sector to finish the month down 4.1%.
- Large-cap defense de-rated as the conflict premium came out. A September 22 Reuters report that Iran had offered to reopen the Strait of Hormuz knocked Lockheed Martin and RTX down about 3% in a day, extending a slide already underway. Analysts also linked the weakness to the risk that the midterms could slow planned defense spending increases, while investors in Europe kept questioning how quickly record budgets will convert into orders.
- Within the drone-focused holdings, September punished execution and dilution risk. Red Cat fell 24.8% after an August revenue miss, a lowered analyst price target and CEO share sales. Swarmer fell 46.2% as its post-IPO lock-up expired on September 15, days after it agreed to buy Ukrainian ground-robot maker Ratel Robotics for up to $224 million in cash and stock, against only $216,000 of second-quarter revenue.
- Tariff protection arrived but did not help much. The principal Section 232 drone tariffs took effect September 3, yet the US-listed manufacturers they were designed to protect were among the month’s weakest performers. Tariffs reduce foreign competition; they do not fund a production ramp or replace revenue that has yet to arrive.
- The holdings that worked had visible order flow. Next Vision largely recovered its August decline as it received regulatory approval for a $2.7 million order and booked another $3.5 million order at month-end, on top of a backlog of roughly $265 million. Terra Drone rose 12.0% in dollar terms in a month that included its half-year results, a new Taiwan distribution agreement and a two-for-one stock split, as its defense pivot continues.
- Commercial adoption kept building, but the regulatory unlock stayed on hold. FAA Part 108 (routine Beyond Visual Line of Sight operation) remained under White House review, with the FAA hoping to publish by year-end. The more commercially oriented names were mixed, and EHang, the fund’s main eVTOL (electric vertical take-off and landing) exposure, fell 6.0%. The key question for DRNZ is whether more of the demand now visible in procurement begins to show up in listed companies’ results
Top 10 Holdings
| Name | Symbol | Weighting |
|---|---|---|
| Next Vision Stabilized Systems | NXSN IT | 15.43% |
| Ondas | ONDS | 15.24% |
| AeroVironment | AVAV | 14.03% |
| Unusual Machines | UMAC | 5.56% |
| DroneShield | DRO AU | 5.12% |
| Red Cat Holdings | RCAT | 4.74% |
| AEVEX | AVEX | 4.45% |
| ELSIGHT | ELS AU | 4.12% |
| TERRA DRONE | 278A JP | 3.46% |
| PALANTIR | PLTR | 3.06% |
*As of 9/30/26. Holdings are subject to change. For a complete list of fund holdings, click here.
Important Information
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The Fund’s investment exposure is concentrated in the same industries as that assigned to the underlying securities. Some or all of these risks may adversely affect the Fund’s net asset value (“NAV”) per share, trading price, yield, total return, and/or ability to meet its investment objective. The value of the Fund, which focuses on underlying securities in the industrials sector, may be more volatile than a more diversified pooled investment or the market as a whole and may perform differently from the value of a more diversified pooled investment or the market as a whole.
Drone and UAV Companies Risk. Drone and UAV companies are closely tied to the economic fortunes of such companies’ research, design, manufacture, operation, or enabling technologies of drones and other unmanned aerial systems. The market for drone and UAV-related products and services is nascent, highly competitive, and characterized by rapid technological change, evolving regulatory frameworks, and heightened geopolitical sensitivities. Many drone and UAV companies are smaller, less seasoned issuers that may be more vulnerable than larger, diversified companies to fluctuations in demand, supply-chain disruptions, product obsolescence, patent or trade-secret litigation, and may have limited access to capital.
Emerging Markets Risk. Investments in securities issued by governments and companies operating in emerging market countries involve additional risks relating to political, economic, or regulatory conditions not associated with investments in securities and instruments issued by U.S. companies or by companies operating in other developed market countries.
Equity Securities Risk. Equity securities are subject to changes in value, and their values may be more volatile than those of other asset classes.
High Portfolio Turnover Risk. The Fund may actively and frequently trade all or a significant portion of the Fund’s holdings. A high portfolio turnover rate increases transaction costs, which may increase the Fund’s expenses.
Concentration Risk. The Fund will be concentrated in an industry or a group of industries to the extent that the Index is so concentrated. To the extent the Fund has significant exposure in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the Fund’s investments.
Liquidity Risk. The Fund may hold certain investments that may be subject to restrictions on resale, trade over-the-counter or in limited volume, or lack an active trading market.
Funds distributed by: Foreside Fund Services, LLC, member FINRA, not affiliated with Rex Shares, LLC, or its affiliates.
