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European Stocks: A Generational Buying Opportunity Says Luschini


You could spend a lot of time trying to pick a worse place to invest right now and maybe end up in Tehran, or you could simply acknowledge the obvious and and dive into the deals that are scattered all across Europe right now. That's right, I said it. Europe is cheap.

At a time when money is coming out of U.S. stocks at the fastest pace in six weeks, Europe is just too cheap to ignore.

"If you look at Euro-related equities, in terms of their valuation, over the top of U.S. valuations, that disparity is at a 40-year low," says Mark Luschini, chief investment strategist at Janney Montgomery.

While impossible to perfectly time the market, Luschini says investors cannot ignore a "generational opportunity" to buy European stocks at exceedingly cheap valuations. It may not be time to ''dive in with both feet," but he's convinced that it's time to be stepping into, or at least be prepared to take advantage of, a select group of individual stocks, country funds or regional indexes.

Which brings us to the other hard part - pulling the trigger once you've gotten up the nerve to jump in. Luschini says there are plays to be made each way, but generally he's more inclined to buy securities in "the core countries, and principally Germany," at this juncture.

He recommends a blanket approach, via an ETF like the Vanguard MSCI Europe Fund (VGK), or selecting multi-national names that will ''survive the crisis," like Siemens (SI) in Germany or the big oil or pharmaceutical names in the U.K., all of which are poised to feel the effects of any reflation, globally or regionally.

As for the riskier, more beaten down stocks in Europe, Luschini says he thinks a "solution is in the offing" but still needs to see "more definitive action from European officials to mutualize the risk" before going into what he calls the ''peripheral countries."

Will there be volatility (or ''market riots'' as Luschini calls them) ahead? You bet. But that doesn't change the fact that European stocks are as cheap as they've been since 1972 and the Munich Olympics.