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For the last three years, European stocks have been out of favor in Wall Street and for a good reason: Half of Europe was in a severe recession; the other half was barely growing; sovereign debt woes captured the headlines of the financial press; and euro was a questionable currency.

In the last six months, things begin to look better for the Old Continent. Sovereign debt issues fade on the back pages of the financial press, and the euro is rallying, as major European countries are on the rebound. This morning, for instance, major European PMI data confirm that the rebound continues: France manufacturing PMI, for instance, came at 49.8 in July, up from 48.8 in the previous month; German's manufacturing PMI came at 52.5, up from 50.8 in the previous month, even Spain came up with better number. This means that now is the time for investors to go bargain hunting for European stocks, as valuations continue to remain depressed. 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 (NYSE:SAN), Spain's banking giant with a large presence in Europe and Latin America. Also, buy Governor and Company of the Bank of Ireland (NYSE:IRE), one of Ireland's largest banks to benefit from a comeback of the Irish economy. Portugal Telecom (NYSE:PT), pays a 7.40 percent dividend. In addition, buy National Bank of Greece (NYSE:NBG), the largest bank of Greece with an extensive presence in the Balkan region, Turkey, and Egypt.

Company

Banco Santander

Bank of Ireland

Portugal Telecom

National Bank of Greece

Operating Margin

23.33%

464.20

12.19

-66.88

Dividend yield

9.20

--

7

--

Source: Yahoo.finance.com

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

3. A Low risk strategy. Buy French, Spanish and Italian companies that trade in NYSE like British Diageo (NYSE:DEO) with growing profit margins, paying 1.80 percent dividend, French oil and gas giant Total (NYSE:TOT), which pays 4.10 percent dividend, Italian energy company Eni (NYSE:E), which pays a 2.50 percent dividend, and British telecom giant Vodafone (NASDAQ:VOD), paying 7.10 percent dividend.

Company

Diageo

Total

Eni

Vodafone

PE

17.82

8.11

11.35

11.58

Operating margin (%)

30.54

12.16

23.05

12.23

Dividend yield (%)

1.80

4.10

2.50

7.1

Source: Yahoo.finance.com

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

Company

Market share in Europe (%)

Ford

12

Oracle

13

Apple

20

Source: Annual corporate reports

A few words of caution: European stocks have already been on a rebound, gaining 19 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 risk environment; they may not necessary be a bullish sign for equities.

Source: 3 Investment Strategies For A European Rebound