While a weak dollar may have squashed some overseas travel plans this summer, investors can still enjoy a European vacation by sticking with foreign stocks.

It should come as no surprise to market watchers that foreign stocks, boosted by a sinking greenback, have been shredding their American counterparts. The average foreign large-cap growth fund has returned almost 20% annually over the past five years, according to fund tracker Morningstar, compared with a yearly return of 14% for the S&P 500.

What may astonish investors, however, is the notion that international stocks are still relatively cheap, despite the huge run-up in share prices.

"Even after all this time, European stocks remain significantly undervalued," says Wendell Perkins, portfolio manager for the $115 million ( JFIEX) JohnsonFamily International Value fund, in a video on TheStreet.com TV.

"According to our models, they are trading at nearly a 25% discount to U.S. stocks, plus they pay dividends on average of 3%. That's still a great story." Perkins' fund is up 12.5% year to date and has returned an average of 21.5% annually for the past five years.

And there is more to the European story in Perkins' view, most notably the ability to increase margins.

"As the E.U. has expanded, established European companies have been tapping into low-cost labor in Eastern Europe," says Perkins. "So while their governments may be slow to change, European companies are moving quickly to add shareholder value, because they realize they are now competing in a global marketplace."

One company Perkins favors for all these reasons is BASF ( BF). Like its American rivals, DuPont ( DD) and Dow ( DOW), the German chemical giant has been buying and shedding assets to "make it less cyclical." As for valuation, Perkins likes the fact that BASF trades at 10 times cash flow and pays a dividend of 2.4%.

Finally, Perkins appreciates the company's strategic decision to "increase its Asian exposure to 20% of sales, from 14% over the next three to five years."

Elsewhere in Europe, Perkins sees GlaxoSmithKline ( GSK) as a potential winner, despite the recent selloff that was due to questions surrounding its diabetes drug Avandia.

"Glaxo still has a great pipeline and top-sellers like their asthma treatment Advair, so the stock has overreacted to the downside," says Perkins. "Furthermore, the time to buy Big Pharma is when they have blockbuster problems and the stocks get beaten down. After the stocks implode, you see some great values."

Europe, old and new, may continue its climb upward, but one region that remains chained down is Japan. Japanese stocks, as represented by the widely traded iShares MSCI Japan Index ( EWJ), have risen only 3% this year, vs. 8% for the S&P, and 12% annually over the past five years.

Perkins, whose portfolio has 20% of its allocation in Japanese stocks, believes that a change is afoot though, and that it's being driven by an increasingly chipper consumer and -- of course -- a cheap yen.

"The recovery in the Japanese economy is real," says Perkins. "Japanese GDP is expected to be in the 2.5% range in 2008, up from 1.7% in 2007, and that's on par with U.S. growth expectations."

"The change in consumer sentiment is evident now. The sense of gloom and disillusionment that pervaded the entire 1990s has finally abated," says Perkins.

Sentiment is up and -- more importantly for the export-driven nation -- the yen is down. Over the past two years, the yen has sunk to 120 per dollar from 110. In other words, for every piece of farm machinery a company like Kubota ( KUB) -- a Perkins pick -- sells overseas, it makes a bundle more yen in return.

"Most people believe the yen will appreciate, but the Japanese have always been wary of a strengthening currency," says Perkins. "And as value managers, we like Kubota because its cheap at nine times cash flow and its international sales are booming, up 18% in 2007."

Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.

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