After posting new all-time highs in mid-February, the past month-plus has seen both the S&P 500 and the Nasdaq enter correction territory, with the S&P marking a 10.1% decline in what was the fifth-fastest correction in the last 75 years.
Investors are increasingly on edge about the threat of tariffs, slowing U.S. growth, and general economic uncertainty.
But European stocks are faring much better.
The STOXX Europe 600 index, comprising 600 large-, mid- and small-cap stocks from 17 different European countries and representing roughly 90% of Europe’s total market cap, is up 8.8% already this year. It’s not a fluke. The European Central Bank has lower interest rates (2.75%) than the Federal Reserve (4.25%-4.5%) and is expected to continue slashing at a faster pace, to below 2% by year’s end.
And while the U.S. economy is still growing faster than most European countries (2.8% in 2024, versus 0.9% in the European Union), U.S. GDP growth is projected to slow to 1.7% this year (at least based on the latest FOMC projections), while Europe’s GDP growth expands to 1.1%.
That obviously would still mean that America’s economy is outpacing Europe’s growth, but European stocks are much cheaper than U.S. stocks, trading at 14x forward earnings estimates, versus a 19.6 forward price-to-earnings ratio for the S&P.
Overseas Stocks Drawing Attention (and Investment Dollars)
So, with borrowing costs and stock valuations cheaper, and economic growth improving rather than contracting, European stocks hold a lot of appeal right now, especially at a time when, amid the inherent uncertainty and volatility that a second Donald Trump presidency brings (mostly due to tariffs), some investors are seeking alternatives to U.S. stocks.
According to a Bank of America Fund Manager survey last month, 34% of fund managers said that global stocks (i.e. ex-U.S. stocks) will be the leading asset class in 2025, while U.S. equities ranked third at 18% (gold came in second, at 22%).
This month, the same survey showed the most significant rotation from U.S. stocks to European stocks since the survey began (in 1999), with 39% of fund managers being overweight Europe.
That can change, of course, but for now, money is rapidly flowing towards Europe.
3 European Value Stocks in an Uptrend
So, with European stocks suddenly in favor, which across-the-pond equities look the most attractive from a value perspective? Here are three profiles that stand out.
1. Barclays PLC (BCS)
Projected 2025 EPS growth: 31.4%
Projected 2025 Revenue growth: 5.4%
Forward P/E ratio: 7.5
Price/sales ratio: 1.8
Price/book ratio: 0.62
Stock performance: 23.1% YTD
2. Aptiv PLC (APTV)
Projected 2025 EPS growth: 16%
Projected 2025 Revenue growth: 1.2%
Forward P/E ratio: 8.6
Price/sales ratio: 0.82
Price/book ratio: 1.64
Stock performance: 4.0%
3. Aegon Ltd. (AEG)
Projected 2025 EPS growth: 28.5%
Projected 2025 Revenue growth: 2.1%
Forward P/E ratio: 8.3
Price/sales ratio: 0.44
Price/book ratio: 1.18
Stock performance: 14.3%
Barclays is a name you likely know. It’s a multinational large-cap bank headquartered in the United Kingdom that’s estimated to generate a record $28.2 billion in revenue this year. It’s the largest bank in Europe by total assets and is thus a great way to play European – and U.K. – economic growth at a discount.
Aptiv is an auto parts supplier based in Switzerland that was a spinoff from the now-defunct American company, Delphi Automotive. It makes software and hardware solutions for car companies around the world, aimed primarily at advanced safety features, electric vehicles, and automated driving. APTV shares were in the dumps for nearly three full years after peaking above 176 a share in late 2021, but it appears – given the expected growth this year – investors are now finding value in it, with shares up 20.4% since finally bottoming in November. This looks like a decent buy-low candidate with plenty of upside.
Finally, Aegon is a mid-cap Dutch life insurance company. It’s boring, but it’s growing, with 28.5% EPS growth expected this year. Investors have taken notice, with the stock up 14.3% year to date and nearing its all-time highs from last May.
All three of these undervalued European stocks boast the right combination of value, growth and share price momentum. After years of underperformance, market winds seem to be shifting to Europe these days. Given the comparative value, it’s a good time to add some European exposure to your portfolio.
