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| By Nilus Mattive |
My daughter and I have been here in Portugal for the last several days.
She came here to compete in an international surf contest.
I came to watch, eat a metric ton of seafood and get a general sense of what’s actually happening in Europe economically and otherwise.
But mostly to eat a metric ton of seafood.
Last night, at one of the restaurants on Porto’s famous “seafood street” I started with Percebes — hyperlocal gooseneck barnacles harvested from wave-battered rocks — and tiny shrimp they simply call Camarao da Costa.
From there, I had three good-sized sardines … several squid … and a few very large prawns, all of which were brushed with olive oil and grilled over charcoal right out in the open.
I also ordered some Vinho Verde to wash it all down. I really wanted a glass, but the waiter brought an entire bottle.
Back in California, a seafood feast like this would easily exceed $100 and the bottle of wine would be at least $30.
Yet here, even in a well-known area charging tourist prices, all that seafood was under $40 and the whole bottle of wine was an astonishing $10.
You’ll find the same kind of relative bargains when you take a look at European stocks right now …
The S&P 500 is currently trading at about 20 times forward earnings estimates.
Meanwhile, the Stoxx Europe 600 trades at 14.8 times forward earnings. U.K. stocks are even cheaper still.
These broad index numbers are not perfect comparisons, of course.
As I’ve explained many times before, the current “U.S. stock market” as measured by the S&P is now dominated by a handful of highly priced technology firms.
In fact, the S&P 500 is roughly 40% weighted to tech stocks at the moment.
The Europe Stoxx 600 has about a 10% weighting by comparison.
But we can find similar discounts even if we start examining things sector by sector.
For example, if we look at some of the more conservative areas — the types of companies that also tend to pay good dividends — we find discounts of 20% or 30%.
U.S. financials are trading at 15.6 times forward earnings. European firms go for 11.2 times.
Consumer staples, mostly food and beverage companies, will cost you 22 times earnings in the U.S. versus 16.5 in Europe.
And utilities, the original “orphan and widow” stocks?
You might pay 17.1 times earnings in the States against 13.8 in Europe.
To be clear, these discount gaps have actually narrowed over the last year or two.
Which is one of the reasons my Safe Money Report readers are already up about 40% on the Franklin International Core Dividend Tilt Index ETF (DIVI) since I recommended it to them a year and a half ago.
DIVI is a broad-based global stock fund that emphasizes income-producing shares.
It currently gets a “B-” Weiss Rating and holds hundreds of different stocks, about 60% of which are based in Europe.
Other purely Europe-focused ETFs include the Vanguard FTSE Europe ETF (VGK) andthe iShares MSCI Eurozone ETF (EZU). The latter only includes countries that use the euro currency.
Don’t have an allocation to European stocks right now?
I think there could still be more upside from here.
For starters, if the U.S. dollar weakens from current levels, then U.S.-based investors will automatically get a tailwind.
That’s because the shares, and any dividends they pay, are originally priced in their home currencies.
When those currencies are rising against the dollar, a U.S. investor captures the difference.
And either way, European companies continue to show good fundamental strength.
As a recent Wall Street Journal article1 explains it:
“Europe just had its best reporting season in years.
“Companies in the benchmark Stoxx Europe 600 index boosted earnings per share by 18% on average in the second quarter compared with a year earlier.
“Earnings barely grew at all in 2025 and 2024 as the strongest companies in the index were offset by weaker players.
“Growth is now widening beyond a narrow group of AI and bank stocks, according to Gerry Fowler, who leads the European equity strategy team at UBS.
“Government spending and private investment in priorities like infrastructure, energy security and defense are creating real opportunities.”
So, if you like relative values and want to diversify your portfolio a little further, take another look at European stocks right now.
You can either buy a fund like DIVI — which will also give you exposure to Asia as well — or use our Weiss Ratings to screen for individual European companies that trade as American Depositary Receipts (ADRs) on U.S. exchanges.
Best wishes,
Nilus Mattive
