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Europe Makes a Comeback

The four tests include having a market cap greater than $1 billion, cash flow greater than the market's mean, shares outstanding in excess of the market's average and trailing 12 months sales that are at least 1.5x greater than the market's mean. The stocks I am recommending meet all of these criteria. And they have strong yields.

One stock is France-based Sanofi (SNY). This company enjoys a position of real strength in the pharmaceutical industry, where it is one of the largest. It has a strong pipeline of products it is developing and a strong lineup of existing products. And its yield is 3.74%.

The second recommendation is Royal Philips (PHG), based in the Netherlands. This is a diversified technology and consumer products company whose product lineup includes light bulbs, kitchen gadgets, televisions and electric shavers, among others. This is a company with solid positions in many markets. Its yield is 3.00%.

Not all of Europe is on its economic knees, and not all European companies are struggling. These companies are well worth a close look.

At the time of publication, Reese and his clients were long Sanofi.

John P. Reese is founder and CEO of Validea.com, an investment research firm, and Validea Capital Management, an asset management firm serving affluent investors and companies. He is also co-author of two investing books, including The Guru Investor: How to Beat the Market Using History's Best Investment Strategies (Wiley). Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Reese appreciates your feedback. Click here to send him an email.

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