Revisiting Jonathan Rose’s KRMN trade… why the trade still has juice… the alignment with government priorities… Brian Hunt is focusing on drone stocks… how to determine the best entry/exit dates for a drone trade
Let’s kick off today’s issue with a trade idea from veteran trader Jonathan Rose.
I first highlighted it in the Digest on September 9. Since then, it’s up 68%. But subscribers who got in when Jonathan profiled it in August are up closer to 135%.
The good news is that the opportunity hasn’t passed you by. The trade thesis still fits cleanly into where the market (and Washington) are headed next.
I’m talking about aerospace/defense company Karman (KRMN).
Why we flagged KRMN early
KRMN isn’t a household name – quite the opposite.
It’s a small defense contractor doing the unglamorous, but critical, work that helps missiles fly and rockets launch. It’s the kind of company that stays under the radar until the tailwinds become impossible to ignore.
But when Jonathan found it, he saw two green flags – one broad, one narrow.
On the broad front, he focused on the widening divergence between the Nasdaq 100 and the Russell 2000. Mega-cap tech was ripping higher, while small caps were being left behind.
Jonathan didn’t see that divergence as a red flag. He saw it as stored energy – particularly for leading small-cap players such as KRMN.
That kind of divergence is a coiled spring, and when it releases, it’s small caps that get the explosive move.
On the narrow front, the global security backdrop was deteriorating, not improving.
The war in Ukraine was grinding on. The conflict in Gaza was continuing. Tensions with Iran were rising. And defense budgets – particularly in the U.S. and among allies – were already trending higher as governments recalibrated for a more volatile world.
Viewed through that lens, Karman stood out.
As Jonathan put it at the time:
When I look at KRMN, I see a powerful policy tailwind, deep government ties, and a market that’s still sleeping on the story.
So, Karman checked every box:
- A leading small-cap poised to outperform
- Deep government relationships
- Exposure to defense modernization
- And a market that, at the time, was still largely sleeping on the story
The results speak for themselves. As noted earlier, since we profiled KRMN, it’s climbed 68%.
Why Jonathan is still bullish
Even with that move, Jonathan’s conviction hasn’t faded.
Here’s what he told me yesterday:
Karman is still growing quickly, with mission-critical systems already embedded in defense and space programs. That gives the company real visibility into future revenue.
We’re seeing investors rotate toward next-generation defense technology – leaning into growth-focused names over the traditional legacy contractors.
With earnings up more than 230% year-on-year and a market cap still well under $5 billion, KRMN is the perfect opportunity to get into a massively undervalued stock before the herd climbs in.
And this brings us to the bigger picture – and why the tailwinds behind KRMN are likely to continue.
In November, the Department of Defense released its National Security Strategy – a document that effectively codifies the same forces that first drew Jonathan to Karman in the first place…
Three themes stand out:
- Reshoring and re-industrialization –rebuilding domestic manufacturing capacity, securing supply chains, and reducing reliance on foreign inputs.
- A revolution in military affairs – accelerating defense modernization across advanced weapons systems, space assets, cyber capabilities, and next-generation platforms.
- Domestic security priorities –strengthening energy dominance, infrastructure resilience, and access to critical resources at home.
This isn’t abstract policy language. It’s a signal about where capital, contracts, and political will are likely to flow over the coming years.
KRMN sits squarely in the supply chain that enables modern defense systems – the kind of components and capabilities that become more valuable when the U.S. prioritizes military readiness, domestic production, and technological edge.
So, the same forces that helped push KRMN to nearly 70% gains since we first profiled it haven’t gone away. If anything, they’re becoming stronger.
That’s why Jonathan continues to view KRMN not as a trade that’s “played out,” but as one that still fits the direction of policy, spending, and market rotation.
As he just noted:
A powerful policy tailwind. Deep government ties. A market that’s still sleeping on the story.
That’s the exact recipe that’s given us our biggest winners. And I believe KRMN is next in line.
I want to cover additional ground today, but for more of Jonathan’s past analysis into KRMN, check out his free Masters in Trading Live episode “5 Reasons to Buy KRMN.”
Beyond the KRMN analysis, the video is an example of the high-quality market insights Jonathan delivers every day that the markets are open in his Masters in Trading Live broadcasts.
You can sign up for those free, daily market videos right here.
As I’ve said before, Jonathan is one of the best teachers/traders in our industry, and he gives away many of his top ideas daily. But don’t take my word – tune in to some of his Masters in Trading Live broadcasts and decide for yourself.
Want another reason to be long defense – especially drones?
Senior analyst Brian Hunt has you covered.
Regular Digest readers recognize Brian as InvestorPlace’s former CEO. Today, he’s a senior analyst who is in the process of launching a new, free investment newsletter called Money & Megatrends.
Here’s Brian from last week:
Donald Trump wants military spending to go way up, and our advice to own drone stocks is paying off like a broken slot machine. Are you profiting?
Brian has been bullish on drones for a simple reason: after years of innovation, military and surveillance drone makers can now produce effective systems at low cost. They also deliver extremely high cost-to-damage inflicted ratios – something the Russia/Ukraine conflict has made painfully clear.
Brian highlighted two names:
Both have hit fresh all-time highs in recent weeks, and momentum suggests even higher prices are on the way.
On that note, a quick “congratulations” are due for Luke Lango’s Breakout Trader subscribers.
They entered a KTOS trade back in May 2023 – and last week, it crossed the 600% return mark. As I write on Wednesday, it’s up roughly 609%.
While those gains are in the books, if Brian and Jonathan are right, this opportunity may still be in the early innings.
As Brian put it:
The drone megatrend is set to last for many years.
Given its potential to revolutionize war, surveillance, and communication, I believe this uptrend keeps running.
We’ll be making Brian’s new newsletter available soon, and will let you know when it’s ready.
Want to see if KTOS or KRMN are currently in a “green zone” for a trade?
Most investors focus on what to buy.
Far fewer focus on when to buy…even though timing has always mattered just as much.
To help traders with this issue, Keith Kaplan, CEO of our corporate affiliate TradeSmith, and his team of quants began to wrestle with a question:
Do individual stocks exhibit repeatable, calendar-based patterns in when they tend to rise and fall?
After running decades of historical data across thousands of stocks, they found that many names do, in fact, show statistically reliable seasonal windows – periods when they’ve historically delivered outsized gains.
That insight led to the TradeSmith Seasonality Tool, which now tracks seasonal patterns across more than 5,000 stocks, pinpointing historically bullish and bearish windows down to the day.
Here’s what Keith’s team found in backtests:
- 83% win rate
- 857% total growth over 18 years – more than double the S&P 500
- Even in 2007, the worst year tested, trades averaged a 37.9% annualized return
Bottom line: by using historical market data to inform entry and exit timing, investors can stack the odds in their favor – even in choppy or overvalued markets.
Circling back to KTOS
What does the data say about Kratos (KTOS)?
According to the Seasonality Tool, a bullish window opens up between January 29 and February 20, with another strong window coming in May.
Here’s how that looks within the tool.
The Seasonality Tool provides the following pattern statistics for this upcoming January window:
- 80% accuracy rate
- +4.96 average return over this specific window
- +5.89% median return
- +82.24 annualized return
That said, between now and January 29, caution is warranted.
As Luke noted in yesterday’s Breakout Trader issue, KTOS is short-term overbought, with its RSI recently above 80 and its MACD indicator near vertical.
Translation: don’t chase it here.
But zooming out, the big picture hasn’t changed. The defense and drone tailwinds look extremely powerful as we move toward the spring.
Next Tuesday January 20th at 10 a.m., Keith will “Prediction 2026” where he’ll walk through this Seasonality Tool
He’ll show you exactly how this system works, how the backtests were run, and how investors can apply it today. You can register for the event right here.
When you sign up, you’ll get immediate access to the Seasonality Tool so you can test it on your own stocks before the event.
Bottom line: better data doesn’t guarantee profits – but better timing has always separated average investors from the great ones.
Whether you can join Keith next Tuesday or not, check out KRMN and KTOS today. Both look like money-makers going forward.
Have a good evening,
Jeff Remsburg
