Reese’s PB&J cups are a superb example of a “line extension.” I’m sharing this because one of the companies in the Stock Picker’s Corner Model Portfolio just announced a brilliant line extension of its own – Kratos Defense & Security Solutions Inc. (KTOS), highlights Bill Patalon, chief stock picker at Stock Picker’s Corner.
It’s a pinnacle of innovation — when a company opens up new revenue spigots or marketing vistas by adding cool new features to an existing (and already successful) product. Because it builds on (extends) an already successful product line, it’s also cost-effective innovation. And it’s a sign of very strong leadership.
Kratos Defense & Security Solutions Inc. (KTOS)
With Kratos, as I detailed in a report back in January, it won a five-year Pentagon contract. It was worth as much as $1.45 billion and its purpose was to help the country speed up development of hypersonic weapons systems. That has it teaming up with such innovators as Leidos Holdings Inc. (LDOS) and Rocket Lab USA Inc. (RKLB).
But it’s the “line-extension” involving the Kratos XQ-58A Valkyrie drone jet that’s got me totally stoked. With its early versions of the Valkyrie — a self-piloting jet that’ll have all sorts of uses, including the role of “Loyal Wingman” for manned combat planes – it was billed as being “runway independent.”
In laymen’s terms, it lacked its own landing gear — the struts, wheels, steering and braking systems virtually all airplanes possess. The jet was moved about on a special “launch trolley” – and could be launched from the back of a truck. That was seen as a “benefit” — since operations from forward areas while under fire could mean launching the jets from runways that are unfinished, truncated in length, or cratered by bombs.
In a move that’s the reverse of what you’d expect from an aircraft development program, Kratos decided to extend the Valkyrie line by adding landing gear. The company unveiled the plan in a rendering on its corporate “X” account earlier this month.
The image in the post shows a Valkyrie with the same “tricycle” gear arrangement most combat jets use today. The gear is clearly retractable, into separate “bays” with hatch doors. That will add weight to the jet – and possibly reduce the internal storage capacity for weapons — but increase the versatility of the airplane.
Recommended Action: Buy KTOS.
