Just caught wind of something interesting about Kratos Defense stock tanking 9% yesterday with basically no company-specific news attached. Started digging into why, and I think I found the real story here.

So Trump's been rattling sabers about Greenland lately, which obviously has Denmark and the whole NATO alliance pretty heated. WSJ reported that European leaders are actually discussing whether they should reduce military purchases from the U.S. and accelerate their own defense spending instead. That's the geopolitical backdrop.

Now here's where Kratos comes in. The company makes advanced military drones and satellite communication systems that have apparently become pretty attractive to NATO allies and European defense contractors. If Europe suddenly decides to shift away from American weapons systems as a response to the Greenland drama, that could theoretically impact Kratos's European revenue stream.

But here's the thing that makes this sell-off seem overblown: Europe only accounts for about 4% of Kratos's total revenue. North America is the real money maker at 83%. So while the geopolitical tension is real, the actual financial impact on Kratos is probably minimal.

I get that markets sometimes react to narratives more than fundamentals, and maybe yesterday's drop was just traders playing it safe. But if you were comfortable holding Kratos stock before the Greenland situation blew up, this particular risk probably doesn't change the investment thesis. That said, I do think Kratos trades at pretty elevated valuations, so that's a separate conversation worth having.