Ark Invest buys $9.1M of Kratos as Wood doubles down on defense drones

Ark Invest purchased $9.1M of Kratos Defense & Security Solutions stock during the first nine days of July, regulatory filings show.

"Kratos specializes in cost-effective drone technology at a time when the Pentagon is prioritizing unmanned systems," an Ark Invest portfolio manager said in a statement on the trade. The buying brings Ark's total Kratos position to about $110M, making it the tenth-largest holding across the firm's exchange-traded funds.

Kratos shares have fallen more than 33% year to date and trade at nearly 300 times trailing earnings. The company reported first-quarter revenue of $371M, up 22.6% from a year earlier, and guided for full-year revenue of $1.7B to $1.76B, a 29% increase at the midpoint. Adjusted earnings before interest, taxes, depreciation, and amortization are expected to land between $170M and $176M, up 44% at the midpoint.

The purchases come as the Pentagon's fiscal 2027 budget request includes more than $70B for military drones and anti-drone systems. Kratos announced on July 6 it is building a 106,000-square-foot expansion of its Oklahoma City plant to increase production of its Valkyrie XQ-58A jet drone, which costs $3M to $5M per unit versus more than $100M for a manned fighter jet. The company's backlog stood at $2B at the end of the first quarter.

Beyond drones, Kratos has secured several high-value contracts this year. In March, the U.S. Space Force awarded the company a $468M follow-on agreement to build ground management software for the military's Resilient Missile Warning and Tracking satellite constellation. Kratos also produces counter-drone technology and rocket propulsion systems.

On the same day Ark bought Kratos shares, the firm sold more than $8M of Advanced Micro Devices stock through the Ark Innovation ETF. AMD shares have surged about 140% year to date after the company reported first-quarter earnings that beat consensus estimates.

The purchases show Wood views Kratos as a long-term beneficiary of the shift toward drone-centric warfare, despite its elevated valuation. Investors will watch the company's second-quarter earnings report for updates on production capacity and margin expansion.

This article is for informational purposes only and does not constitute investment advice.