Even before German Chancellor Angela Merkel's irksome summit with President Donald Trump, uncertainty had been looming across the pond. As the slow march toward Britain's exit from the EU continues and the tense French presidential election nears, there's a lot to keep track of with respect to the European markets. Add to the mix the European Central Bank's fairly loose grip on the interest rate reigns--even though economic data is on the upswing--and you've got more than a few plates in the air.

According to an article last month in the Wall Street Journal, in February the Eurozone Economic Sentiment Indicator hit its highest level since March 2011, and "the world economy is enjoying unusually synchronized strength."

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The ECB's still-accommodative policy stance extends to the continuation of their bond-buying program. Last December, says the WSJ article, ECB President Mario Draghi announced that bond purchases would run until at least the end of 2017 (although at a reduced pace), and ECB guidance said interest rates are expected to "remain at present or lower levels for an extended period."

Here in the U.S., we're seeing a little shine come off the penny with a methodical, gradual tightening with two interest rate hikes under our belt and more on the way. Increasing doubts surrounding Trump's policy agenda have put a dent in the Trump Bump, stalling (and, as of last week, reversing) what had been a thick-skinned rally. European equities, on the other hand, have outperformed the U.S. over the past month, notwithstanding concerns about Brexit and the upcoming French presidential election. While many portfolio managers believe global equities are overvalued, the vast majority of the 200 surveyed monthly by Bank of America Merrill Lynch believe that U.S. stocks are the most overvalued of all.

An article in last month's MarketWatch argued that a "well-diversified portfolio should span geographies as well as sectors of the market," adding, "whatever your strategy, there are many good reasons to consider an investment in Europe now-perhaps even above U.S. stocks." It cites earnings growth as well as share prices as reasons to reach overseas and asserts, "Any way you slice it, European equities are trading for much more affordable valuations than stocks elsewhere in the developed world."

Our Europe portfolio we run in Validea's Professional research suite includes the region's highest scoring stocks as measured by our guru-inspired stock screening models. Year-to-date, this portfolio has returned 9.5%, versus 7.1% for the MSCI. In 2016 and 2015, our portfolio earned a consistent 5% return each year versus losses of 1.7% and 3.5%, respectively, for the MSCI and over the past 12 months the portfolio is up 18% vs. 9.9% for the MSCI (see chart below). 

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Here are five high-scoring stocks from our Europe portfolio:

Ferrari NV (RACE) - Get Report is an Italy-based designer, manufacturer and retailer of sports cars operating under the Ferrari brand. The company is favored by our Validea Momentum model for its quarter-over-quarter growth in earnings-per-share of 46.51%, more than double the minimum requirement of 18%. Share price of $70.72 is well within 15% of the 52-week high of $71.08, a plus under this model. Relative strength of 88 indicates strong price performance relative to other stocks.

Ternium SA (TX) - Get Reportproduces finished- and semi-finished steel products and iron ore, which are sold either directly to steel manufacturers, steel processors or end users. The company earns high marks under our Peter Lynch-based stock screening model given the ratio of price-earnings to earnings-per-share growth (PEG ratio, a hallmark of the Lynch philosophy) which, at 0.38, is in the "best case" range. This model also favors the company's debt equity of 27.75%. TX also scores well under our Kenneth Fisher-inspired investment strategy in light of its price-sales ratio of 0.73 (under 0.8 is preferred by this model) and long-term EPS growth of 16.33% (versus the minimum requirement of 15%).

Daimler AG (DDAIF) is an automotive engineering company that earns a perfect score under our James O'Shaughnessy-based stock screen due to its size (market cap of $81.51 billion) and cash flow-per-share of $14.91, over 9 times the market mean ($1.59). Shares outstanding of 1,069 well exceed the market average, a plus under this model, and trailing 12-month sales of $165.21 billion far exceed the market average. Our Martin Zweig-inspired investment model likes the company's price-earnings ratio of 8.84 (compared to the market PE of 18).

AXA SA (AXAHY) is an insurance company that scores well under our Joseph Piotroski-based investment strategy due to its book-market ratio (the inverse of the price-book ratio) which, at 1.25%, places it in the top 20% of the market. This strategy also like the company's operating cash flow of $19.07 billion. AXAHY earns a perfect score from our O'Shaughnessy-based stock screen in light of its cash flow-per-share ($1.84) which exceeds the market mean ($1.59). Trailing 12-month sales of $142.53 billion are well above 1.5 times the market mean ($20.78 billion), a requirement of this model. Our Lynch-based model favors the PEG ratio of 0.62.

Allianz SE (AZSEY) is a financial services company that earns a perfect score under our O'Shaughnessy stock screening model due to its price-sales ratio of 0.81, which is below the maximum allowed of 1.5. Persistence in earnings-per-share is also favored by this model. Our Lynch-based strategy favors the PEG ratio of 0.73 as well as positive earnings-per-share ($1.61).

At the time of publication, John Reese and/or his private clients were long RACE, TX, DDAIF, AZSEY & AZSEY.