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After a Strong 2018, Is Kratos Still a Buy?

DATE POSTED:January 11, 2019

Kratos Defense & Security Solutions (NASDAQ: KTOS) has always been a bit of an anomaly in the defense sector: a high-risk, high-potential-reward company competing in a sector full of slow and steady Dividend Aristocrats. The company's 2018 share performance reflected that divide: Kratos gained 33% on the year, compared to a 20%-plus loss for General Dynamics and Northrop Grumman, and double-digit declines for most of the major contractors.

Kratos' performance was even more impressive considering that the company last March was the target of a critical report by short-seller Spruce Point Capital Management, which argued that the company's stock could drop 40% to 70%. Kratos did fall an initial 11% following the report but recovered nicely over the course of the year as it was able to win new business and make progress on some of its most promising development-stage projects.

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