As we head into the final weeks of 2013, European central bankers are on pins and needles. They’re hoping the fourth-quarter economic data reveal signs that the Continent is truly on the mend.#-ad_banner-#

An early November report from the European Commission sees signs of that upturn coming. The report’s main takeaway: “The signs of hope that we saw last spring have started to turn into tangible positive outcomes. After six consecutive quarters of stagnation or contraction, the EU economy has posted positive growth in the second quarter of 2013. The recovery is expected to continue, and to gather some speed next year.”

Indeed, while the European economic region likely contracted a bit in 2013, these economists predict GDP will likely grow 1.5% in 2014, and perhaps 2% in 2015. And where will that strength come from? “Domestic demand is expected to take over as the main engine of growth,” they predict.

If they’re right, then it’s useful to make sure you have European exposure in your portfolio. Heading into Labor Day, my colleague David Goodboy profiled the Vanguard FTSE Europe ETF (NYSE: VGK).

A quick look at a five-year chart of this ETF against the S&P 500 Index shows the extent to which European blue chips have lagged. The outperformance for U.S. stocks really began to pull away in late 20109, when it became apparent that the U.S. economy was on the mend while Europe was not. Now, with Europe perhaps on the mend as well, global investors are likely to allocate more funds to European stocks and funds.

If you prefer stock selection to ETFs and mutual funds, then you’ll find that a number of leading European stocks are still attractively priced, relative to their U.S. counterparts.

Here are three of them:

1. Siemens (NYSE: SI )

Along with ABB (NYSE: ABB), Siemens is often mentioned as being the “GE of Europe,” and Siemens’ exposure to health care, energy, power and infrastructure sounds an awful lot like General Electric’s (NYSE: GE) business model. GE’s additional focus on financial services keeps this from being a perfect analogy and explains GE’s slightly higher operating margins and lower return on equity. Still, on a price-to-earnings (P/E), price-to-sales or an enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) basis, it’s clear that GE gets a lot more credit with investors than Siemens. In truth, both of these companies have a solid global footprint, though Siemens derives a somewhat higher percentage of its sales in Europe than GE does.

2. ING (NYSE: ING )

This Dutch financial giant took several big hits during the financial crisis, most notably from its lending exposure to Greece. Those were rare missteps for a firm that has an otherwise long track record of conservative yet profitable strategies. Indeed many people consider ING to be as strong an operator as Wells Fargo (NYSE: WFC) is here in the U.S. Wells Fargo is one of Warren Buffett’s top holdings, and ING would likely hold great appeal to him as well. Here again, it’s hard to consider this a true apples-to-apples comparison. ING, like many European financial services firms, is a hybrid between an insurer and a bank, whereas the U.S. tends to have banks and insurers operate separately. So ING’s profit margins and returns on equity will always be lower than a pure play bank, but far higher than a pure play insurer. Still, in terms of profits and price-to-book value, ING is a clear bargain.

3. Volkswagen (OTC: VLKAY)

I’m a big fan of Ford (NYSE: F), which has arguably become one of the best-run companies in America — and the world. I thought shares were a steal back at $11, and think they still represent solid value at a current $17. But if I had to pick one automaker besides Ford, it would be Volkswagen, which has deftly modernized a wide range of vehicles using just a few global platforms. VW, Audi, Porsche, Lamborghini and other company brands can all boast of solid profit margins through the widespread use of shared components. Case in point: Porsche’s new smaller SUV, the Macan, shares many parts with the Audi A5 and VW Touareg. And though Ford’s shares remain appealing, VW’s shares appear to be the better value. And if the European car market ever rebounds, then VW likely has even greater sales leverage than Ford.  The fact that Ford uses more debt leverage than VW leads to stronger returns on equity, but by every other key measure, VW is the more appealing stock.

Risks to Consider: The European Commission’s report highlighted the rising chances for an economic rebound but also took note of risks that could derail the nascent recovery. I encourage you to read that full report before considering investing in Europe.

Action to Take –> After an amazing multi-year run, the U.S. market should not be home to 100% of your portfolio. Instead, it’s wise to spread your assets around to emerging markets and Europe, which accounts for a quarter of global economic activity.

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