"Unloved" Stock Pick: Kratos Defense & Security Solutions Inc. (Nasdaq: KTOS)

Money Morning's "unloved" pick of the week is defense contractor Kratos Defense & Security Solutions Inc. (Nasdaq: KTOS).
An unloved investment is one that's been beaten down – but is actually a great value. Investors then get an amazing entry point into a good long-term investment.

We've liked Kratos for a long time. Money Morning Defense & Tech Specialist Michael A. Robinson first recommended Kratos stock in June 2013. More recently, Money Morning Chief Investment Strategist Keith Fitz-Gerald named KTOS as one of his favorite picks for 2015.

Kratos Defense & Security Solutions (Nasdaq: KTOS): About the Company

Kratos Defense & Security Solutions traces its roots to a company called Wireless Facilities Inc. WFI was founded in San Diego in 1994 as a telecommunications firm. After a series of acquisitions from 2004 to 2009, the company changed its name to Kratos Defense & Security Solutions. Kratos merged with Integral Systems in 2011. Today Kratos provides services in the areas of communications, combat systems, and surveillance. Among its specialties are drone warfare and cybersecurity. The firm has a market cap of about $294 million. Kratos employs about 3,900 people.

Kratos (Nasdaq: KTOS) Stock: Why It's Unloved

After a big run-up in 2013, KTOS stock had leveled off this year — until recently. On Nov. 3 Kratos reported a loss of $0.19 a share. Excluding one-time costs, Kratos still missed expectations of $0.13 by reporting EPS of $0.10. Revenue also missed, coming in at $217.1 million versus a forecast for $244.4 million. Then, when the overall market dipped in December, it took Kratos stock to a 52-week low of $4.21. That was a more than 53% drop from the June 9 peak of $9.08. Even with a recent bounce to $5.12, KTOS is down more than 43% from its peak.

But here's why Fitz-Gerald thinks KTOS will be sitting at $10 this time next year…