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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 recently 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) Chart

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 showed 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.

My recommended action would be to consider purchasing shares of Kratos Defense & Security Solutions Inc.

About the Author

William (Bill) Patalon III is the chief stock picker of Stock Picker’s Corner (SPC). Before he moved into the investment research business in December 2005, he spent 22 years as a journalist, most of it covering financial news as a reporter, columnist, and editor.

His most memorable interviews include former President Richard M. Nixon, General Electric CEO John F. “Jack” Welch, Forbes magazine publisher and former Presidential candidate Steve Forbes, and business-turnaround specialist and helicopter-industry pioneer Stanley Hiller Jr. Bill has a BA in Print Journalism from Penn State University and an MBA in finance from the Rochester Institute of Technology.

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