After being almost decimated by the PIIG’S debt crisis, it seems that Europe is back with a vengeance. The continent’s past few years of low economic growth and austerity measures have finally begun to give way to prosperity among many nations in the European Monetary Union. A variety of data is now pointing to a much rosier situation in the old country. That’s pushed stocks and broad developed market funds like the iShares MSCI EAFE (NYSE:EFA) higher over the last few months.

There is still risks for the continent- contagion spreading from the uprisings in the Ukraine comes to mind. The longer term picture is getting better by the day. Given this scenario, betting on Europe could lead to some hefty double-digit gains in the year ahead.

Leading Economic Indicators Pointing Higher

For many of the nations in Europe, the PIIG’s debt crisis and multi-year recessions are becoming a thing of the past. All the major nations in the Eurozone- including France, Germany, and Italy- have officially emerged out of recession last year. Driving that return to economic growth has been huge gains in these nation’s manufacturing sectors.

According to data provider Markit’s latest Flash Eurozone Composite Purchasing Managers Index (PMI), overall business activity in the Eurozone has surged. The metric jumped to 53.2 in January. That’s the fastest gain in nearly two and half years and reading above 50 suggest economic expansion. Across the board, the main Eurozone manufacturers saw gains. Germany’s PMI now sits at 32-week high, while even PIIG’s Spain and Greece recorded steady growth in manufacturing activity.

Other data for the old country remains positive as well.

Retail sales have ticked up, while much needed credit has begun to thaw. Credit spreads for the most troubled nations in Europe- like Spain and Italy- are easing and there is an increased willingness to lend by Euro-area banks. Meanwhile, corporate balances sheets remain healthy due to years of deleveraging.

Adding this to the European Central Bank's (ECB) willingness to do “whatever it takes” to keep growth alive, and it’s easy to see why European stocks have now hit their pre-recession highs. The broad-based STOXX Europe 600 index recently hit its highest close since January 2008. Yet, strategists still predict that double digit returns are possible from European equities as economic growth still has a ways to go before it hits precession amounts.

Adding Some European Exposure

Given the tailwinds, investors may want to add some exposure to the old country. European firms are expected to grow earnings by 14% for the upcoming year. That makes them a cheaper choice versus U.S. firms- despite their recent gains.

A prime way to do that is through the Vanguard FTSE Europe ETF (NYSE:VGK). Like all of Vanguards products, VGK charges an ultra-cheap 0.12% in expenses. For that low price, investors gain access to 504 different European firms. These include stalwarts like energy producer BP (NYSE:BP) and pharmaceutical firm GlaxoSmithKline (NYSE:GSK). However, VGK includes exposure to non-euro currency using nations. The SPDR Euro STOXX 50 (NYSE: FEZ) lets investors hone in on the EMU growth.

Another option could be betting on Europe’s two biggest winners- Germany and the U.K. Both countries expect to grow by leaps and bounds in 2014. Germany will benefit from a low euro and rising exports, while the U.K. grinds forward in its domestic economy. The iShares MSCI Germany (NYSE:EWG) and iShares MSCI United Kingdom (NYSE:EWU) make easy work adding the pair to portfolio. Both yield around 1.5%.

Speaking of yields, Europe remains a dividend hunter’s paradise. Average dividend yields for European equities are still more than twice that of their American counterparts as the continent has a more dividend friendly culture. To that end, the First Trust STOXX Euro Select Dividend (NYSE:FDD) could be a good buy. FDD tracks 31 different strong European multinational dividend payers and yields a whopping 5.31%. That dividend friendliness extends into the regions small-caps as well. WisdomTree Europe Small Cap Dividend (NYSE:DFE) yields a juicy 2.39%.

The Bottom Line

Things continue to get better for Europe. After going through some pretty nasty side-effects in the aftermath of the Great Recession, growth has once again returned. For investors, that could mean adding a dose of European equities to a portfolio.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

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