Every summer, some big shop sends its top brass on a European road trip. They come back and write up a memo full of purple charts telling you what the locals already knew.

This year it was KKR’s turn.

Henry McVey and his crew spent July bouncing between Milan, where the firm recently opened its 29th office worldwide, and stops in Germany and the U.K. The memo they produced eventually landed on my desk with the usual hedge language and a title almost as dry as mine.

Buried in there, though, was a point worth stealing.

Europe is not one economy.

It never was.

KKR calls the phenomenon “dispersion.” I call it a market doing exactly what markets do when nobody is paying attention to the details underneath the index.

The headline growth story in Europe is stale, and everyone already knows it.

Modest growth, modest growth, more modest growth.

Fine.

Nobody serious argues that point anymore.

The opportunity sits beneath that number, in the specific places where defense spending, energy security, digital infrastructure, consumer spending, and corporate simplification are quietly rewriting earnings for individual companies while allocators keep waiting for a continental renaissance that is never going to arrive.

It does not need to arrive.

Consider the numbers KKR actually put on paper.

German wholesale power prices—the thing that nearly broke the European economy in the winter of 2022—have fallen from roughly €465 per megawatt-hour to about €97 today.

That alone tells you the crisis playbook from three years ago no longer applies.

Corporate carve-out activity in Europe totaled roughly 15,400 deals from 2022 through 2024, more than Asia and North America combined, as management teams under pressure from higher capital costs finally began simplifying decades of conglomerate sprawl.

European households are sitting on €33 trillion of savings, with roughly €10 trillion parked in bank deposits earning next to nothing.

That is either the world’s largest sleeping asset pool or the world’s largest missed opportunity, depending on which side of the trade you are standing on.

None of this requires GDP growth to suddenly accelerate.

It simply requires capital to move toward where the actual work is getting done—and for the market to eventually notice.

Let me walk you through a handful of names built for exactly that lag, along with two ETFs for readers who would rather buy part of the theme wholesale.

Schneider Electric (SBGSY)

Schneider Electric sits at the center of the grid bottleneck KKR identified as one of the most compelling long-duration infrastructure stories in Europe.

The math is almost comic in its simplicity.

Fiber coverage across the continent has nearly tripled over the past decade, and renewable generation now exceeds fossil-fuel generation for the first time. Yet more than 120 gigawatts of planned renewable capacity sits stranded, waiting on transmission and distribution upgrades that have not been built.

Producing electricity is only half the battle.

You still have to move it.

Schneider makes the switchgear, automation systems, energy-management equipment, and electrification technology required to turn stranded generation capacity into usable power.

The same equipment becomes increasingly important as data centers, factories, electric vehicles, and other power-hungry infrastructure place additional strain on electrical systems.

This is not a wager on faster European economic growth.

It is a wager that Europe eventually wires up what it has already built—and that companies supplying the equipment required to finish the job get paid along the way.

Munich Re (MURGY)

Munich Re is a name I keep returning to because reinsurance rewards patience more than almost any other business, and patience is the whole game right now in European insurance.

KKR’s data shows European life insurers running private investment-grade credit at well under 1% of their general accounts and private assets at less than 9%.

For U.S. insurers, those figures are roughly 16.5% and 42%, respectively.

That is an enormous gap.

It will not close next quarter.

It probably will not close next year.

It can close gradually over a much longer period as European insurers pursue the same asset-backed finance and private-credit yields that American insurers have embraced for the past decade.

Munich Re has the balance sheet, underwriting discipline, and investment expertise to participate in that transition rather than scrambling to catch it.

More importantly, investors do not need the transition to happen tomorrow.

The dividend pays you to wait.

There is an old Stoic habit of separating what you control from what you do not.

You do not control when European insurers finally reposition their books.

You do control whether you get paid while they figure it out.

Compagnie Financière Richemont (CFRUY)

Richemont offers exposure to another important shift occurring beneath Europe’s uninspiring headline growth numbers: affluent households continue spending, but increasingly on premium products, travel, luxury, and experiences rather than traditional mass-market goods.

Europe’s economy has steadily become more services-oriented over the past two decades, while manufacturing’s share of employment has gone essentially nowhere. Tourism remains enormously important across the continent, and wealthy consumers continue directing significant amounts of capital toward experiences and premium brands.

That matters for Richemont.

Cartier, Van Cleef & Arpels, and the rest of the company’s luxury portfolio sell directly into a global consumer base whose spending is driven less by ordinary economic fluctuations than by wealth, tourism, brand desirability, and long-term growth in affluent households.

The distinction is important.

This is not a bet on whether European consumers buy another handbag next quarter.

It is a bet on a structural shift in spending toward premium brands and experiences, combined with the scarcity value of luxury houses that cannot simply be replicated by throwing money at advertising.

Richemont owns some of the strongest brands in the global luxury market.

As long as affluent consumers continue prioritizing experiences, travel, jewelry, watches, and other premium purchases, those brands remain positioned directly in the path of that spending.

Orange (ORAN)

Orange is the boring one.

Boring is underrated.

European fiber coverage has climbed from approximately 27% of households in 2015 to nearly 77% today, a roughly 2.8-fold increase in a decade.

Yet penetration sits at only about 42%.

That gap between coverage and actual subscriptions is not necessarily a problem.

It is a runway.

The expensive part—putting the infrastructure into the ground—has already happened across much of the continent.

Now Orange needs households and businesses to continue adopting a service increasingly sitting right outside their front doors.

That does not depend on a single act of Parliament.

It does not depend on Berlin approving another massive infrastructure package.

It does not require European GDP growth to suddenly resemble India.

People simply need to continue upgrading connectivity.

Utility-like economics with an adoption curve attached do not come along very often.

Orange gives investors a relatively straightforward way to participate.

Rheinmetall (RNMBY)

Rheinmetall is the name every reader probably already half owns through some index fund, which normally would keep it out of an Under the Radar issue.

The valuation argument around it deserves to be made plainly, however, rather than assumed.

The stock has run hard as Germany permanently relaxed its debt brake constraints and committed enormous sums toward infrastructure and defense.

That spending commitment is real.

So is Rheinmetall’s order backlog.

Demand for weapons, ammunition, vehicles, and other defense systems has exploded since Russia’s invasion of Ukraine fundamentally changed Europe’s assumptions about military preparedness.

But there is an important distinction between a government announcing spending and that money actually reaching corporate income statements.

KKR’s own data shows German government investment spending declined in 2025 even as markets became increasingly optimistic about the country’s fiscal outlook.

That creates a gap between announcement and appropriation that investors have largely been willing to ignore.

Eventually, the checks need to clear.

If you already own Rheinmetall, let the backlog keep doing the talking.

If you do not, patience may be the better approach.

There is no reason to chase a stock simply because the underlying thesis is correct.

A spending plan is not the same thing as a spending check that has cleared.

Leonardo DRS (DRS)

Leonardo DRS requires a slightly different explanation.

This is not a pure European-defense stock.

Leonardo DRS is a U.S.-based defense technology company controlled by Italian aerospace and defense giant Leonardo. It trades on the Nasdaq and generates substantial business from the U.S. defense market.

That makes it an indirect rather than direct way to participate in the broader Western rearmament cycle.

And that distinction actually makes the company interesting.

Europe is rebuilding military capacity while the United States continues investing heavily in defense modernization. The same geopolitical pressures driving European governments toward higher defense budgets are also reinforcing demand for sensing systems, advanced electronics, naval power systems, network computing, and other technologies supplied by DRS.

For an American investor, the structure is unusually convenient.

You get exposure to a company controlled by one of Europe’s major defense contractors without dealing with the thin volume, wide spreads, and settlement headaches that can accompany unsponsored foreign ADRs.

DRS trades on a major U.S. exchange with meaningful liquidity behind it.

Sometimes the cleanest way to participate in an international investment theme is through the domestic listing sitting directly alongside it.

The Periphery Is Beating the Core

For readers who would rather not pick through individual companies, there is a simpler way into the part of this thesis I find particularly interesting.

Europe’s periphery is outperforming its core.

KKR’s Aidan Corcoran has argued for years that Europe’s peripheral economies would outrun the core during this cycle.

The data has backed him up even more strongly than his own team expected.

Spanish and Italian unemployment rates have fallen by more than three percentage points since December 2021, while German and French unemployment rates sit roughly flat to slightly higher over the same period.

Fixed-capital formation tells a similar story.

Spain and Italy are both running well above 2022 levels.

Germany remains below where it started.

That is not the Europe most investors think they own.

iShares MSCI Spain ETF (EWP)

The iShares MSCI Spain ETF gives investors direct exposure to an economy producing one of the better employment and investment recoveries in the developed world without requiring them to predict which individual Spanish bank, utility, or industrial company will emerge as the biggest winner.

Spain has benefited from improving employment, investment, tourism, and stronger domestic economic momentum than many of its larger European neighbors.

EWP packages that exposure into one trade.

No heroic stock-picking assumptions required.

iShares MSCI Italy ETF (EWI)

The iShares MSCI Italy ETF does essentially the same job for a country the financial press loves to write off right up until the economic numbers refuse to cooperate.

Italian labor-market and investment data have been telling a considerably better story for the past couple of years than the country’s reputation would suggest.

That disconnect is exactly what interests us.

Neither EWP nor EWI is glamorous.

Both offer a clean, low-cost way to own a trend already visible in the economic data rather than betting everything on identifying the single best stock buried inside it.

The Opportunity Is in the Dispersion

None of this requires believing Europe suddenly becomes a growth machine.

It will not.

Pricing European assets as though a continental renaissance is right around the corner would make the same mistake KKR itself warns against.

The opportunity is not in waiting for Europe as a whole to suddenly accelerate.

It is in paying attention to the specific places where capital, productivity, consumer behavior, infrastructure spending, and policy are already converging.

The valuation backdrop makes that particularly interesting.

European equities are pricing in only about 4.4% embedded earnings growth over the next several years, compared with nearly 14% for the S&P 500.

At the same time, European stocks trade at roughly 15 times earnings versus approximately 20 times for the American index.

That does not automatically make Europe cheap.

It does mean expectations are considerably lower.

And low expectations are useful.

Schneider does not need Europe to boom. It needs the grid to be upgraded.

Munich Re does not need a continental renaissance. It needs capital to migrate gradually toward higher-returning assets while underwriting remains disciplined.

Richemont needs wealthy consumers to keep spending.

Orange needs households to connect to fiber infrastructure that already exists.

Rheinmetall needs announced defense spending to become actual orders.

Leonardo DRS needs the Western defense modernization cycle to continue.

Spain and Italy simply need to keep performing better than investors expect.

Those are very different investment theses living underneath the same European index.

That is the point.

The lag between the work getting done and the market noticing that it got done is where the money gets made.

It always has been.

Europe just happens to be one of the places where that lag is sitting particularly wide today.