What Makes Kratos Defense & Security Solutions (KTOS) an Attractive Investment?

Loomis Sayles, an investment management company, released its “Small Cap Growth Fund” investor letter for the second quarter of 2025. A copy of the letter can be downloaded here. The second quarter started with significant volatility but concluded at an all-time high for the S&P 500. The fund returned 9.37%, underperforming the Russell 2000 Growth Index's 11.97% return due to security selection within the information technology and financial sectors.  In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Loomis Sayles Small Cap Growth 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 33.27%, and its shares gained 254.88% of their value over the last 52 weeks. On September 29, 2025, Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) stock closed at $88.08 per share, with a market capitalization of $14.867 billion.

Loomis Sayles Small Cap Growth Fund stated the following regarding Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) in its second quarter 2025 investor letter:

"Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) is a leader in both hardware and software solutions supporting space exploration and monitoring and has a high growth target drone business with the US government as its main customer. This company also has a potentially even larger opportunity with its tactical drone offering, which we believe should continue to draw attention from the US military."

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 the best short-term AI stock.

In another article, we covered Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) and shared stocks with consistent growth to invest in. 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.