Let’s face facts, Europe continues to be a mess.
 
Many of the reasons for the Eurozone’s woes- such as stalling growth and enormous public debt loads- still persist. Riots, austerity measures and possible defaults are still a real threat plaguing the E.U. and these worries do have the capability to unhinge the already fragile European recovery. However, despite these pressures, many investors have once again begun to find value within Europe and its rich basket of multinational leaders. As such, funds like the SPDR EURO STOXX 50 (NYSE:FEZ) now sit near new 52-week highs.
 
Yet, there is one Eurozone nation that still ranks extremely low on most investors' priority lists. For those portfolios willing to take the contrarian path, Italy could be one of the best bargains in the market today.

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Still Cheap
There is certainly some justification for ignoring the nation. Italy's public debt is one of the highest in the world. Currently, this debt sits at nearly 130% of gross domestic product (GDP). More importantly, the Financial Times reports that between 2000 and 2011, Italy was the only OECD country where GDP per head actually fell “because of poor competitiveness.” Add this to the nation's aging population and political ineptness and it’s easy to make the assumption that there isn't too much to get excited about in the Mediterranean nation.
 
However, digging down there is plenty to be bullish about when it comes to Italy.
 
First, after two months of functioning without a real government, Italy’s newly elected Prime Minister Enrico Letta has promised a series of reforms designed turn around the economy in 18 months. By reforming electoral law, suspending a property tax, cutting ministers' salaries and urging European leaders to reverse austerity measures, Letta hopes to turn back the tide and help return Italy to economic growth.
 
Secondly, despite its huge debt to GDP, Italy’s current spending habits are actually pretty low. The nation’s current deficit is 3% of GDP- with most of that due to paying interest on debt it already has.  The nation’s austerity measures seem to be working on the debt fronts. Overall, Italy’s debt picture isn’t great, but it’s not grim.
 
Perhaps the biggest reason for investors to consider Italy is that its markets are still cheap when compared with many of its European rivals as well as North America. Currently, Italian stocks can be had for a price-to-book ratio of around 0.77. Putting that into the U.S. trades on a price-to-book of around 2.3, while Spain- who is in much deeper trouble than Italy- can be had for a price to book of 1.2. The last time Italian stocks were this cheap- back in 2009- they rallied more than 45% in just seven months.

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Betting on an Italian Renaissance
The easiest way to add exposure is through the iShares MSCI Italy Index (NYSE:EWI). The exchange-traded fund tracks 28 different Italian firms including eyeglass maker Luxottica (NYSE:LUX) and Telecom Italia (NYSE:TI). Understandably, performance for the fund hasn't been that great over the last few years, but it could be an interesting buy as the nation seems to be moving in the right direction. Expenses are a cheap 0.53% and the fund yields a delicious 2.42%.
 
Like many companies that call Italy home, energy firm ENI (NYSE:E) is actually a huge giant spanning the globe. While primarily known as an oil producer, ENI has been gradually shifting towards natural gas production and continues to explore unconventional assets in Africa. The firm is poised to be one of the largest exporters of liquefied natural gas (LNG) do to this push. The firm- along with partner Anadarko (NYSE:APC) - are developing the world’s second largest LNG export terminal to take advantage of their huge finds off the coast of Mozambique. Shares of ENI currently can be had for a P/E of 11.89 and a 4.6% dividend yield.

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Finally, with Italy casting off its yoke as “Europe’s next problem”, the nation’s bonds are actually quite attractive. The PowerShares DB Italian Treasury Bond ETN (Nasdaq:ITLY) provides exposure to the U.S. dollar value of the returns of an Italian bond futures index, while the PowerShares DB 3x Italian Treasury Bond ETN (Nasdaq:ITLT) adds leverage to the mix. ITLY was surprise performer last year, returning 31.47% to investors.
 
The Bottom Line
Investors are getting more comfortable with owning European stocks once again. For bold investors willing to go against the grain, Italy could offer some of the real deep values. The country's recent elections have pointed towards a new era that could signal real economic growth. At the same time, stocks within the Mediterranean nation are dirt cheap.
 
At the time of writing, Aaron Levitt did not own any shares in any company mentioned in this article.

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