While the S&P 500 stock index gained an average of 14% over the past five years, the S&P Europe 350—a similar index of European stocks—gained just 6.5% a year. And while annual economic growth in the US averaged 2.1% over that period, in Europe it was just 1.2% as European nations faced crisis after crisis.

But top fund manager Philippe ­Brugere-Trelat says that it’s a mistake to ­ignore stocks of companies based in Europe. Bottom Line Personal asked him why that is and which stocks are most attractive now…

Earnings Gain, Currency Retreats

After years of false starts, Europe may finally be ready to follow the same path as the US economy and stock market. European stocks are among the cheapest in the developed world, with a price-to-earnings ratio (P/E) of 16.4% for the Standard & Poor’s Europe 350 based on expectations for profits in the next year, compared with a P/E of 19.1% for the Standard & Poor’s 500 stock index. Moreover, eurozone economic activity has surged to a five-year high as the strengthening US dollar has made exports denominated in the weaker euro more attractive in global markets. And corporate earnings are expected to grow by 12% this year. This recent acceleration in growth will continue to be helped by loose monetary policy that includes near-zero interest rates and the European Central Bank buying government bonds to stimulate economic growth.

Still, investors need to be quite ­selective when picking European stocks because of a few major concerns that must be monitored…

The slowly unfolding “Brexit” drama. Having voted to withdraw from the ­European Union (EU), the UK now has about two years to negotiate new treaties and trade agreements that will need to be ratified by all 27 remaining EU members. I expect that these negotiations will be lengthy and acrimonious because there is no reason for the EU to go easy on the UK and risk encouraging other countries to leave. I expect GDP growth for the UK to slow as businesses there put investment and hiring on hold.

The Trump administration’s nationalistic stance. There’s a danger that the US’s new antiglobalization political tilt also could take firm hold in France and Germany, both of which are holding major elections this year. I think it’s unlikely that strongly nationalist candidates such as French National Front leader Marine Le Pen will take power. But if it does happen, it will threaten the future of the EU, and European stocks could become very volatile. France holds elections on April 23…Germany on September 24.

How to Invest in Europe Now

Right now I’m investing in areas of the European stock market that are undervalued. All of the stocks listed below are available on US exchanges and trade in US dollars. (You also can avoid the currency risk of investing in foreign stock funds by choosing ­currency-hedged exchange-traded funds—see ETFs That Hedge the Dollar.

British multinationals. These are companies that are domiciled in the UK but derive the bulk of their revenue from the US and other markets with stronger currencies and faster-growing economies. That means their foreign profits get a tremendous boost when those currencies are translated back into the weak British pound. The pound fell to a five-year low against the euro and a 31-year low against the US dollar last year due to concerns over the effects of Brexit. I expect the pound’s weakness against major currencies to persist. My favorite British stock now…

GlaxoSmithKline (GSK) is the world’s sixth-largest pharmaceutical company, manufacturing blockbuster prescription drugs such as Paxil and Augmentin, vaccines and consumer items ranging from Aquafresh toothpaste to Flonase allergy treatment. ­Although GlaxoSmithKline has struggled because of patent expirations on its top-selling asthma medicine Advair and its lipid-lowering drug Lovaza, it has taken bold steps to reshape its future, making acquisitions to become a leader in vaccine treatments and HIV/AIDs therapies.

Energy giants. Oil companies are benefiting from a rebound in demand and prices. They have scaled back expenses over the past few years, and many of their stocks offer very attractive dividend yields. My favorite energy ­giant now…

Royal Dutch Shell (RDS.B). The company is one of the leading global producers of crude oil. It also owns refineries and service stations and sells consumer products such as Pennzoil motor oil. Shell reduced operating costs by 20% last year and is improving profits by focusing its efforts increasingly on its profitable refining and chemicals businesses and its lucrative deepwater drilling sites off the coast of Brazil and in the Gulf of Mexico…and less on onshore drilling ­projects. A recent takeover of the UK natural gas ­giant BG Group made Shell the world’s biggest natural gas producer.

Insurance companies. Insurers are benefiting from massive consolidation in the industry after several years of ­mediocre growth…and higher long-term interest rates on European government bonds that boost the returns on these companies’ enormous cash holdings. My favorite insurance company now…

NN Group (NNGPF). This Dutch company, which provides insurance and asset-management services to more than 15 million customers, was spun off mid-2014 from financial-services giant ING Group. European regulators forced ING to divest its insurance business in return for a government bailout at the height of the eurozone financial crisis. NN Group is well-capitalized and operates in 18 countries, mostly in Europe. It recently took over its troubled Dutch insurance rival Delta Lloyd Group, strengthening its pension ­business.

Beaten-down exporters. Exporters domiciled in countries that use the euro, such as Germany and the Netherlands, benefit from the strong dollar. The euro was recently worth $1.06, near its lowest levels since 2003. I’m finding the best bargains in businesses that have strong catalysts for growth but stock prices that have been temporarily depressed due to some ­scandal or misperception on the part of investors. My favorite beaten-down exporters now…

Royal Philips (PHG). For most of its 126-year history, this Dutch company was best known as a manufacturer of lighting and TVs. But the stock has struggled as the company began divesting those businesses and reinventing itself as a health-­technology giant, manufacturing high-­tech medical systems such as electrocardiogram, ultrasound, mammography and radiation oncology equipment. This stock is the number-one holding in my fund’s portfolio. I especially like the company’s potential in one of the fastest-growing areas of health care—the “mHealth” market consisting of mobile devices that provide patient monitoring and diagnostics on the go.

Volkswagen (VLKAY). Many investors want nothing to do with ­Volkswagen. The German auto manufacturer, which also owns Audi and Porsche, was plunged into scandal two years ago when the US Environmental Protection Agency found that it had installed software on many of its vehicles designed to cheat on mandatory emissions tests. The stock dropped 25% in 2015 and another 7% last year. But there’s a new CEO and a bevy of new and redesigned models to interest consumers. The company has taken a big step toward resolving the crisis by reaching a $14.7 billion settlement with US regulators and consumers.

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