Karman Holdings Inc

Karman Holdings Inc. designs and manufactures specialized structural and propulsion components used in launch vehicles, missiles, spacecraft, hypersonic systems, and unmanned aircraft. The company serves defense primes, government agencies, and commercial space customers, giving it exposure to growing demand across space, missile defense, hypersonics, and other advanced aerospace programs. While shares detracted from performance due to near-term concerns, we believe Karman’s differentiated engineering capabilities, long-term defense contract visibility, and exposure to expanding government and commercial space budgets support its longer-term opportunity.

Karman Holdings, a supplier of defense and space systems components serving tactical missile, missile defense, hypersonic, space launch and submarine applications, was the sector's largest detractor, falling -38%. Despite a heightened need to replenish US missile stockpiles following the Iran conflict, a deteriorating probability of lawmakers supporting the administration’s $1.5T defense budget, alongside a secondary offering, weighed on the shares. This combination of factors has led us to reduce our position in Karman Holdings.

Karman Holdings Inc. designs, tests, and manufactures mission-critical systems for missile and space programs, which are among the most in-demand segments of the defense industry. The company has unique experience in complex manufacturing methods and proprietary technologies, with nearly 90% of its sales being sole-sourced. Karman is expected to achieve organic growth of 20% or greater, supported by multi-year contracts for missile components that have significantly increased in value. This positions Karman to grow well above its peers as missile production ramps up in response to defense needs.

Karman Holdings Inc. is engaged in the design, test, and manufacture of mission-critical missile systems. The company announced the acquisition of Seemann Composites and Materials Sciences, a strategic move extending its reach into the high-priority maritime defense market. This momentum was compounded by solid fourth-quarter earnings. Additionally, the stock is benefiting from broader tailwinds in the defense and space sectors, as heightened geopolitical tensions and proposals to increase defense spending have driven investor interest.

Karman Holdings was added to the portfolio as we see significant growth potential in the aerospace and defense sectors. The company is executing against a variety of new business opportunities, which positions it well for future performance. The overall health of the end markets supports our positive outlook, and we believe Karman's strategic initiatives will lead to strong returns as these opportunities materialize.

Karman Holdings was added to the portfolio in Q3 as part of our strategy to invest in high-quality companies with specific growth drivers. The technology sector, where Karman operates, is a focus for us, and we believe that Karman has strong growth prospects. Our research indicates that Karman is trading at attractive valuations, which supports our bullish stance on its potential for future performance.

Karman Holdings is a defense company providing key systems to customers in the areas of hypersonics, missile defense and space. Given its small initial allocation and its over 55% appreciation following the IPO, we took profits and exited the position.