Here's Why Karman Holdings Inc. (KRMN) Rose in Q3

Prosper Stars & Stripes, a long/short equity fund, recently released its second quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund underperformed and generated a net return of +9.6% compared to a total return of +8.5% for the long-only small-cap Russell 2000 Index (the “Russell”), and a total return of +5.0% for the long/short equity hedge fund peer group represented by the HFRX Equity Hedge Index (the “HFRX”). For the six months ended 2025, Prosper Stars & Stripes returned a net return of (0.8%) compared to (1.8%) for the Russell and +5.9% for the HFRI. The portfolio demonstrated strong outperformance relative to its net exposure during the quarter. In the second quarter of 2025, US equities reversed the declines seen in the first quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Prosper Stars & Stripes highlighted stocks such as Karman Holdings Inc. (NYSE:KRMN). Karman Holdings Inc. (NYSE:KRMN) engages in designing, testing, manufacturing, and sale of mission-critical systems. The one-month return of Karman Holdings Inc. (NYSE:KRMN) was 1.60%, and its shares gained 20.86% of their value over the last three months. On August 29, 2025, Karman Holdings Inc. (NYSE:KRMN) stock closed at $53.41 per share, with a market capitalization of $7.067 billion.

Prosper Stars & Stripes stated the following regarding Karman Holdings Inc. (NYSE:KRMN) in its second quarter 2025 investor letter:

"Another area of focus for the Composite has been defense. Last quarter, we highlighted our position in Karman Holdings Inc. (NYSE:KRMN), which performed well. Since then, the defense budget has strengthened, and spending priorities have become clearer. In particular, missile and drone defense has emerged as a key area, reflecting the evolution of modern warfare. For example, in the Middle East, Israel’s Iron Dome successfully defended against missile and drone assaults, while in Ukraine, drones have significantly influenced the ebb and flow of the battlefield."

Karman Holdings Inc. (NYSE:KRMN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held Karman Holdings Inc. (NYSE:KRMN) at the end of the second quarter, which was 32 in the previous quarter. While we acknowledge the potential of Karman Holdings Inc. (NYSE:KRMN) 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 the best short-term AI stock.

In another article, we covered Karman Holdings Inc. (NYSE:KRMN) and shared the list of best performing defense stocks to buy. Karman Holdings Inc. (NYSE:KRMN) boosted the Baron Discovery Fund's second quarter performance with earnings that beat expectations. In addition, please check out our hedge fund investor letters Q2 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.