Is Kratos Defense & Security Solutions (KTOS) Aligned with Current Defense Priorities?

Artisan Partners, an investment management company, released its “Artisan Small Cap Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. Investor sentiment at the beginning of 2025 was positive. In 2024, US equities once again outperformed their global counterparts, and there was optimism that the new Republican administration would strengthen the idea of US exceptionalism. However, the first quarter did not meet those expectations. In the quarter, its Investor Class fund ARTSX returned -10.14%, Advisor Class fund APDSX posted a return of -10.10%, and Institutional Class fund APHSX returned -10.07%, compared to a return of -11.12% for the Russell 2000 Growth Index. Markets experienced weakness due to rising fiscal and geopolitical uncertainties during the quarter. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2025.

In its first-quarter 2025 investor letter, Artisan Small Cap Fund highlighted stocks such as Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS). Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is a technology company that offers mission-critical products, services, and solutions. The one-month return of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) was 6.02%, and its shares gained 74.74% of their value over the last 52 weeks. On June 2, 2025, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) stock closed at $38.04 per share, with a market capitalization of $5.84 billion.

Artisan Small Cap Fund stated the following regarding Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) in its Q1 2025 investor letter:

“Notable adds in the quarter included Bright Horizons, Freshworks and Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS). Kratos is a technology company specializing in advanced defense and national security systems. The company focuses on delivering affordable, rapidly deployable solutions in unmanned combat aerial vehicles (drones), missile systems and satellite communications. We believe the company is aligned with current defense priorities, and this was on display in January when it was awarded a $1.45 billion contract from the US Department of Defense to develop testing capabilities for hypersonic weapons. We added to the position.”

Kratos Defense & Security Solutions, Inc. (KTOS): Among Stocks That Will Profit From AI

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Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) at the end of the first quarter, compared to 21 in the fourth quarter. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) reported revenues of $302.6 million in the first quarter, surpassing its guidance range. While we acknowledge the potential of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) and shared Baron Discovery Fund’s views on the company. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.