Does Kratos Defense & Security Solutions (KTOS) Have Potential for Significant Growth and Margin Expansion?
ClearBridge Investments, an investment management company, released its “ClearBridge Small Cap Growth Strategy” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The third quarter continued the market rally in May and June following waning policy uncertainty, a Fed rate cut, and animal spirits fueled by retail enthusiasm for high-growth potential markets, resulting in another double-digit gain. However, the strategy underperformed the benchmark, the Russell 2000 Growth Index, which gained 12.2%. The smallest market caps, the lowest returns on equity, and the highest beta names led the underperformance. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.
In its third-quarter 2025 investor letter, ClearBridge Small Cap Growth Strategy 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 45.64%, and its shares gained 300.58% of their value over the last 52 weeks. On October 9, 2025, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) stock closed at $98.55 per share, with a market capitalization of $16.997 billion.
ClearBridge Small Cap Growth Strategy stated the following regarding Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) in its third quarter 2025 investor letter:
"We continued to deliver strong new idea generation, adding seven new investments in the quarter. Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is an aerospace and defense supplier focused on unmanned aerial drone systems, hypersonic missiles and missile defense, propulsion and space. With key exposures to high-priority areas of the defense budget, a nimble first-to-market manufacturing strategy and proactive capacity investments, we see the potential for significant growth and margin expansion in the coming years."
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) at the end of the second quarter, which was 17 in the previous quarter. While we acknowledge the potential of Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on thebest short-term AI stock.
Content Original Link:
" target="_blank">
