As the European debt crisis continues to unfold, more EU members may be forced to take bailout measures. Recent concerns with the Portuguese economy have replaced Ireland as the debtor du jour, and problems with Greece still linger. Debt concerns in Hungary, Latvia and the Czech Republic have the potential to unhinge the already fragile Euro-zone recovery. Broad-based European funds such as iShares S&P Europe 350 Index (NYSE:IEV) have bounced back from their lows, but are still cause for concern. However, Europe does offer some of the planets largest and most well known multinationals. By focusing on these nations and companies, investors can side step the EU mess.

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London Calling
The United Kingdom may be a good bet for investors in Europe. The U.K. has fared better than the average Euro-zone economy in 2010. The nation attracted more than $1 trillion in foreign direct investment in 2010 and ranks first in a survey of European Attractiveness. The U.K. is also the 6th largest economy in the world and the third largest in Europe, behind Germany and France [iShares MSCI France Index (NYSE:EWQ)].

While the nation does face similar problems as the United States faces, there has been a recent string of good news for U.K. At the beginning of the year, the British purchasing managers index (PMI) hit its highest levels since 1994. A weaker euro and a weak British pound are both benefiting Britain's manufacturers and exporters. Real estate prices in the U.K. are also beginning to stabilize. Home sellers raised prices in January, as a shortage of properties for sale has propped up property values. Prices increased nearly 7.4% in some areas outside of London and 0.3% overall. In addition, parliament seems ambitious in tackling the nation's debt, which currently sits at 71.3% debt to GDP. In order to tackle the debt, the U.K. is undergoing a huge austerity program, its largest since World War II. Even with these spending cutbacks, analysts estimate that the United Kingdom's economy will grow 2.1% in 2011.

The improving economic picture is just one reason investors should consider stocks in the United Kingdom. U.K. stocks are some of cheapest in the developed world. Price to earnings ratios of U.K. stocks trade at a 12-month forward P/E of 10.4 compared to 13.3 for the U.S. Buying U.K. stocks also allows investors to tap into the global growth story. According to UBS Wealth Management, about 70% of earnings from large-cap stocks within the nation stem from outside the U.K. Roughly 20% of earnings from U.K. large-cap, non-financial companies are from emerging markets.

A Fish and Chips Portfolio
As one of the largest developed markets, investors do have a lot of choice when it comes to adding the United Kingdom to a portfolio. The nation is typically included in a large portion of most developed-market ETFs. For investors wanting to hone in the opportunity in the U.K., the easiest way to do that is through the iShares MSCI United Kingdom Index (NYSE:EWU). The fund follows 108 of the largest companies within the nation such as mining giant, BHP Billiton (NYSE:BHP) and pharmaceutical firm GlaxoSmithKline (NYSE:GSK). And at 2.5%, the fund yields more than the S&P 500.

As the third largest reserve currency, behind the USD and the euro, the British pound has fallen during the economic crisis. However, many believe that the pound sterling is currently under-valued at $1.60. Investors wanting to bet on the performance of the pound can use the CurrencyShares British Pound Sterling Trust (NYSE:FXB).

Finally, for investors who prefer individual stock picking, many U.K. companies trade as ADRs on the NYSE, including British American Tobacco (NYSE:BTI) and Vodafone Group (NYSE:VOD).

Bottom Line
The ongoing Euro debt crisis has left many prospects for investors in the some stronger European nations. The United Kingdom represents an opportunity to gain emerging market exposure within a developed nation. While the nation does face some problems, longer term, the nation represents a value proposition. Investors can take advantage of this either through the U.K. ETF or one of the nation's many companies like Diageo (NYSE:DEO). (For more, see ETFs, How Did We Live Without Them?)

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