Slowing growth, exploding public debts and austerity measures, continue to put pressure on the already fragile economic situation in Europe. It's no wonder why so many individuals have soured on the regions prospects and have fled European domiciled stocks over the last few years. However, all may be not lost for the old world. While there are still plenty of issues to be had, the region is still home some of the world’s largest multinational exporters. For investors, betting on the hated continent and its firms could lead to long term investment gains in the years ahead.

A Focus On International Sales

Investors may not want to give up on European stocks just yet. Home to many of the world's largest multinationals, Europe's exported goods are quickly becoming the preferred choice for nations far beyond the old world’s borders. That fact is finally helping spur some gains in the critical manufacturing sector.

Like the U.S., manufacturing in Europe is finally seeing some positive gains. Markit Economics’ gauge of manufacturing in the 17-nation euro area recently hit a 16 month high. The manufacturing purchasing managers’ index (PMI) reached 48.8 in June- which was revised higher from a prior reading of 48.7. Among the nations covered by the PMI survey, only the Germany failed to see manufacturing gains in June. Much of that recent rise in manufacturing output could be attributed to Europe’s new focus on the emerging world. While U.S. companies make an average of 70% of their revenue here in the states, European firms rely on their home continent for less than 50%. According to data compiled by Morgan Stanley (NYSE:MS) and Bloomberg, firms like consumer food giant Nestle (OTCBB:NSRGY) and drug maker Novartis (NYSE:NVS) now get an average of 33% of sales from developing and emerging nations.

That’s almost three times as much as they did in 1997 and for some firms that percentage is much higher. Given that new found focus on international growth, European equities are still cheap. While U.S. benchmarks- like the SPDR S&P 500 (NYSE:SPY) -are at or near all-time highs, European equities haven't recovered by nearly as much since the Global Recession. Meanwhile, metrics like forward P/E ratios, Price-to-book and price-to-cash flows are below their historic averages and below those of U.S. equities.

Buying Europe’s Best

Investors continue to focus on where a company is domiciled, rather than where it makes its money. With many of Europe’s biggest exporting players still “down in the dumps,” investors may want to give the region a go. The broadest and cheapest choice is still the Vanguard FTSE Europe ETF (NYSE:VGK). The exchange traded fund tracks 502 of Europe’s largest firms- including stalwarts like bank HSBC (NYSE:HBC) and software firm SAP (NYSE:SAP) -with the United Kingdom as the largest country weighting. (L4) Over the longer term, the VGK has managed to put up a good performance. However, over the last month, the ETF has dropped around 4.2%. That could be a good entry point for investors. Similarly, the more concentrated SPDR EURO STOXX 50 (NYSE:FEZ) can be used to own Europe’s 50 biggest firms.

The world continues to crave more fossil fuels and Europe could be a prime destination to fill their needs. According to Morgan Stanley, Europe’s oil and gas industry will get more than 54% of their revenue from emerging economies this year. To that end, the triple play of the U.K.’s British Petroleum (NYSE: BP), Norway's Statoil (NYSE:STO) and Italy's ENI (NYSE:E) are a great way to cash in on the sectors record profits. More importantly, these firms offer dividends of 5.2%, 4.2% and 5.5%, respectively.

Finally, Europe's healthcare industry is second to none. The sectors globally-driven and recession-resistant nature makes it almost immune to what happens on continent. Both Denmark's Novo Nordisk (NYSE:NVO) and France's Sanofi (NYSE:SNY) remain the leaders in the diabetes and insulin segments, and both are poised to benefit as a number of worldwide cases continues to grow.

The Bottom Line

Investors continue to shun European equities due to the regions debt issues and economic problems. However, that’s a real shame as the companies on the continent are some of the largest multinationals on the planet. For portfolios, Europe’s largest players are offering some pretty decent values in the current market.

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