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After depressing European economies for more than three years, austerity may be over in Europe, as Portugal, Spain, and Greece are slowing down tax levies and spending cuts. This means that a rebound in these economies may be imminent, and so is a rebound in equities. According to a Barron's cover story last month, the Stoxx Europe 600 Index trades for 11.5 times 2013 estimated earnings, compared to 12.5 of S&P 500. Valuations are particularly low for countries with acute sovereign problems like Greece, Ireland and Spain.

Here are three trades investors may want to consider:

1. A High Risk Strategy. Buy Banco Santander (SAN), Spain's banking giant with a large presence in Europe and Latin America. Also, buy Governor and Company of the Bank of Ireland (IRE), one of Ireland's largest banks to benefit from a comeback of the Irish economy. Portugal Telecom (PT), pays a 7.40 percent dividend. In addition, buy National Bank of Greece (NBG), the largest bank of Greece with an extensive presence in the Balkan region, Turkey, and Egypt, though investors may want to wait until the bank is re-capitalized.

2. Moderate Risk Strategy. Buy European assets, either directly or through ETFs like iShares Spain (EWP), iShares Germany (EWG), iShares Italy (EWI), iShares Greece (GREK), and Currency shares Euro (FXE).

3. A Low risk strategy. Buy French, Spanish and Italian companies that trade in NYSE like British Diageo (DEO), paying 2.90 percent dividend, French oil and gas giant Total (TOT), which pays 5.20 percent dividend, Italian energy company Eni (E), which pays a 4.60 percent dividend, and British telecom giant Vodafone (VOD), paying 3.9 percent dividend.

Company

Diageo

Total

Eni

Vodafone

PE

23.49

8.51

9

-

Operating margin (%)

29.90

13.40

15.95

13.44

Dividend yield (%)

2.90

5.20

4.50

3.9

Investors may also want to consider the shares of Greek companies trading in U.S. exchanges - larger companies with a dominant position in world industry, leaders like Greek shipping companies:

Tsakos Navigation (TNP): A large oil tanker owner and operator with a world-class management team, Tsakos is a value play. The company has $164 million in cash and pays a 5.20% dividend, and could be a big beneficiary of the rebound in European and world economies.

Diana Shipping (DSX): A leader in dry bulk shipping with a PE of 8.69, an operating profit margin of near 50, $373 million in cash. DSX is a major beneficiary of a revival of Chinese manufacturing.

Navios Maritime Partners (NMM): A diverse shipping company with a PE of 9.92, a profit margin of 41%, and a dividend of 13.70%; it is not bad for a low interest environment.

Company

Tsakos Navigation

Diana Shipping

Navios Maritime

PE

--

8.69

9.92

Operating Margin (%)

2.27

32.81

41.47

Dividend yield (%)

5.2

--

13.70

But there is one more investment American investors may want to consider: Buy US companies that draw a large part of their sales from Europe, like Ford (F), Pfizer (PFE), and Oracle (ORCL), to mention but a few.

A few words of caution: European stocks have already been on a rebound, gaining 17 percent this year. This means that markets may have already discounted the easing of sovereign debt crisis. In addition, investors should be careful in using valuation metrics like PEs in an ultra-low environment; they may not necessary be a bullish sign for equities.

Source: How To Trade The End Of European Austerity