Jon Gray 0.9 15 ideas

"I'd also say there are some businesses in Europe that I think will do quite well. Defence, obviously is going to grow a lot." The speaker explicitly calls out European defence as a growth sector. This is a direct macro call based on the enduring geopolitical tensions he references earlier. It benefits major European defence contractors (BAESY for BAE Systems) and by extension, their US peers (LMT, NOC) in a globally tense environment. This is a straightforward sector call. Geopolitical instability is driving sustained higher defence spending in Europe and globally. This is a LONG on the defence sector. Political budget fights could delay or reduce planned spending. Peaceful resolution of conflicts could reduce urgency.

"We have a couple of businesses we took public at the end of last year. Medline in hospital supplies, legions [Legrand] in energy management. These stocks are up, you know, 50, 80% because they continue to grow and the market's looking for sort of terra firma companies." The speaker highlights "terra firma" companies—boring, essential businesses with steady growth—as winning in the current market. He uses Legrand (energy management) and Medline (hospital supplies) as specific, successful examples. While Medline is private, Legrand's US ADR (LGRDY) is a direct play. The thesis also applies to other industrial/healthcare essentials like 3M (MMM). This is a thematic call to focus on high-quality, essential industrial and healthcare suppliers. LGRDY is a direct example; MMM is a comparable "terra firma" industrial. This is a WATCH for potential entry. These "boring" stocks may underperform in a rapid, risk-on market rally. Company-specific execution issues.

"We've been the biggest investors in the world in digital infrastructure data centers... that foundation needs to be put in place first... building data centers in Europe is very hard." The speaker identifies data centers as the foundational, physical prerequisite for the AI revolution. Scarcity of supply, especially in constrained markets like Europe, increases the value and pricing power of existing, well-located assets owned by major public REITs. As the dominant private investor (BX) faces hurdles building new supply, the value of existing public data center operators (like DLR, EQIX) is underscored. This is a LONG on the sector leaders. Rapid overbuilding could eventually ease supply constraints. Technological shifts could change data center requirements.

"We're probably the leading investor in power electricity, giving capital to utilities, electrical equipment. I mean, that foundation needs to be put in place first." AI data centers are massive consumers of power. Gray names power/electrical infrastructure as the *first* necessary layer before AI applications can scale. Investment flowing into utilities and grid infrastructure supports the earnings and capital expenditure profiles of major power companies. LONG on large, regulated utilities and leading clean energy providers that are critical to grid stability and expansion for AI and general electrification. Slow regulatory approval for rate hikes and new projects; potential political pushback on electricity costs; slower-than-expected AI adoption.

"It's hard to reconcile that kind of commentary [about private credit being like 2008] with the actual facts we see on the ground... When we do private credit, we either do it unleveraged... or less than one time levered... I don't see... something larger systemic." Gray defends the health of the private credit market, arguing its structural soundness compared to the banking system pre-2008. As the world's largest alternative asset manager and a major private credit player, Blackstone (BX) benefits from sustained growth and a lack of systemic disruption in this high-fee business segment. Market fears are presented as overblown, which, if correct, should support BX's valuation. LONG on Blackstone as the dominant, publicly-traded player positioned to capture growth in private credit, especially if a feared systemic crisis does not materialize. A severe economic downturn that causes private credit defaults to spike well above historical averages; prolonged high interest rates pressuring portfolio companies; significant outflows from its funds.

"...once the conflict settles, I think oil prices move back down." Gray's base case is that the Middle East conflict will "settle," and the associated risk premium in oil prices will deflate. He views the current high volatility ($30 moves) as temporary. This implies a near-term tactical view that oil prices are elevated due to geopolitics and are likely to fall. A tactical SHORT on oil (via the USO ETF) based on the expectation of geopolitical de-escalation. This is a near-term, event-driven trade. Conflict escalates or spreads, causing a sustained supply shock; OPEC+ intervenes with further production cuts; stronger-than-expected global demand.

Gray describes a "disjointed environment" where headlines suggest a crisis in private credit, yet his data shows borrowers are healthy (low leverage, high growth). He asserts private credit continues to offer a "50% premium versus leverage loans." Publicly traded Business Development Companies (BDCs) like Ares (ARCC) and Blue Owl (OBDC) often trade in sympathy with Blackstone's private funds. If the market perceives a systemic rot in private credit, these stocks sell off. Gray's data suggests the "rot" is nonexistent and the fear is misplaced. This creates a buying opportunity in top-tier BDCs which offer high yields and liquid exposure to the same thesis Gray is defending. LONG. Buying the "baby" that the market is throwing out with the "bathwater" of private credit fear. A genuine recession would spike default rates across the sector, validating the market's fears regardless of current coverage ratios.

Blackstone shares dropped on news of record 7.9% redemption requests in their BCRED fund. However, Gray confirms the firm is meeting 100% of these requests and that portfolio fundamentals are strong (10% EBITDA growth, improving cash flow coverage). The market is pricing in a "liquidity crisis" or a "run on the fund." By stepping in with corporate cash and employee capital to clear the redemption queue, management is explicitly signaling that the assets are undervalued and the liquidity fears are unfounded. When a best-in-class manager buys their own dip during a panic, it usually marks a sentiment bottom. LONG. The sell-off is driven by sentiment/headlines ("spin cycle"), while the underlying cash flows remain robust. If redemption requests accelerate in subsequent quarters despite this move, it could force asset sales at fire-sale prices, damaging the NAV.