As we head into the final weeks of 2013, European central bankers are on pins and needles. They're hoping the fourth-quarter economic data reveal signs that the Continent is truly on the mend.

An early November report from the European Commission sees signs of that upturn coming. The report's main takeaway: "The signs of hope that we saw last spring have started to turn into tangible positive outcomes. After six consecutive quarters of stagnation or contraction, the EU economy has posted positive growth in the second quarter of 2013. The recovery is expected to continue, and to gather some speed next year."

Indeed, while the European economic region likely contracted a bit in 2013, these economists predict GDP will likely grow 1.5% in 2014, and perhaps 2% in 2015. And where will that strength come from? "Domestic demand is expected to take over as the main engine of growth," they predict.

If they're right, then it's useful to make sure you have European exposure in your portfolio. Heading into Labor Day, my colleague David Goodboy profiled the Vanguard FTSE Europe ETF (NYSE: VGK).

A quick look at a five-year chart of this ETF against the S&P 500 Index shows the extent to which European blue chips have lagged. The outperformance for U.S. stocks really began to pull away in late 20109, when it became apparent that the U.S. economy was on the mend while Europe was not. Now, with Europe perhaps on the mend as well, global investors are likely to allocate more funds to European stocks and funds.

If you prefer stock selection to ETFs and mutual funds, then you'll find that a number of leading European stocks are still attractively priced, relative to their U.S. counterparts.

Here are three of them:

1. Siemens (NYSE: SI)
Along with ABB (NYSE: ABB), Siemens is often mentioned as being the "GE of Europe," and Siemens' exposure to health care, energy, power and infrastructure sounds an awful lot like General Electric's (NYSE: GE) business model. GE's additional focus on financial services keeps this from being a perfect analogy and explains GE's slightly higher operating margins and lower return on equity.

Still, on a price-to-earnings (P/E), price-to-sales or an enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) basis, it's clear that GE gets a lot more credit with investors than Siemens. In truth, both of these companies have a solid global footprint, though Siemens derives a somewhat higher percentage of its sales in Europe than GE does.

2. ING (NYSE: ING)
This Dutch financial giant took several big hits during the financial crisis, most notably from its lending exposure to Greece. Those were rare missteps for a firm that has an otherwise long track record of conservative yet profitable strategies. Indeed many people consider ING to be as strong an operator as Wells Fargo (NYSE: WFC) is here in the U.S. Wells Fargo is one of Warren Buffett's top holdings, and ING would likely hold great appeal to him as well.

Here again, it's hard to consider this a true apples-to-apples comparison. ING, like many European financial services firms, is a hybrid between an insurer and a bank, whereas the U.S. tends to have banks and insurers operate separately. So ING's profit margins and returns on equity will always be lower than a pure play bank, but far higher than a pure play insurer. Still, in terms of profits and price-to-book value, ING is a clear bargain.

3. Volkswagen (OTC: VLKAY)
I'm a big fan of Ford (NYSE: F), which has arguably become one of the best-run companies in America -- and the world. I thought shares were a steal back at $11, and think they still represent solid value at a current $17.

But if I had to pick one automaker besides Ford, it would be Volkswagen, which has deftly modernized a wide range of vehicles using just a few global platforms. VW, Audi, Porsche, Lamborghini and other company brands can all boast of solid profit margins through the widespread use of shared components. Case in point: Porsche's new smaller SUV, the Macan, shares many parts with the Audi A5 and VW Touareg.

And though Ford's shares remain appealing, VW's shares appear to be the better value. And if the European car market ever rebounds, then VW likely has even greater sales leverage than Ford. The fact that Ford uses more debt leverage than VW leads to stronger returns on equity, but by every other key measure, VW is the more appealing stock.

Risks to Consider: The European Commission's report highlighted the rising chances for an economic rebound but also took note of risks that could derail the nascent recovery. I encourage you to read that full report before considering investing in Europe.

Action to Take --> After an amazing multi-year run, the U.S. market should not be home to 100% of your portfolio. Instead, it's wise to spread your assets around to emerging markets and Europe, which accounts for a quarter of global economic activity.

Related Articles
  1. Budgeting

    Plated Review, Is It Worth It?

    Take a closer look at the ready-to-cook meal service, Plated, and learn how the company can help you take the hassle out of home cooking.
  2. Investing News

    How China's Economy is Now Like America's

    China's economy could take the global economy down with it; why that might be good news in the grand scheme.
  3. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  4. Fundamental Analysis

    South Korea - King of Exports

    Read about one the most important and successful exporting countries in the world, and learn more about the types of products it exports.
  5. Investing News

    Volatility Vexed? See What the Experts Are Saying

    Volatile times lead to a diversity of opinions on where the market is headed. Here are takes from five investing luminaries.
  6. Investing Basics

    The January Barometer: Is it Still Relevant?

    The January Barometer has been historically accurate. Will that be the case in 2016?
  7. Investing News

    The 8 Highest Grossing Movies of 2015

    Count down the most popular films at the American box office in 2015, and learn how much they earned in the domestic and worldwide markets.
  8. Economics

    Why the Chinese Economy Impacts the U.S. So Much

    Here's how the Chinese economy, the second-largest in the world, impacts the United States.
  9. Investing News

    Why You Should Be Buying Stocks, Not Going to Cash

    Hedge fund managers are buying up the shares of big companies. What do the managers know that we don't?
  10. Economics

    Why Commodities Aren't to Blame for Market Malaise

    Commodities are taking the brunt of the blame for poor investment performance. Are they the real villain?
RELATED FAQS
  1. What is the long-term outlook of the metals and mining sector?

    An industry agency council was established by the World Economic Forum in 2014 to serve as an advisory board on the future ... Read Full Answer >>
  2. What is the railroads sector?

    The railroads sector is comprised of publicly traded stocks for companies that operate railroad tracks and/or trains. Railroad ... Read Full Answer >>
  3. Who are Amgen Inc.'s (AMGN) main competitors?

    Biotech giant Amgen Inc (AMGN) bills itself as one of the first biotechnology firms. It was founded in 1980 and has grown ... Read Full Answer >>
  4. What's the most expensive stock of all time?

    Back in late August 2012, Apple’s (AAPL) stock price reached nearly $700 per share. The stock has since split but has yet ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center