2. Volvo

Volvo (VOLVY) has been transformed in recent years. In fact, Volvo isn't primarily a carmaker anymore. It also manufactures trucks, buses and construction equipment. It's facing a slowdown in several markets around the world. But the fact that it is based in Europe and seen as a European company explains why the stock is inexpensive, says Deakins. Its ADR has moved up to $14 from $11 in June, but it is still down from around $20, where it traded in early 2011.

With Volvo, you get paid a dividend yield of around 3% as you wait for the stock to move up. What might make that happen? Progress by Europeans toward resolving their credit crisis would help the economy there and boost Volvo sales. There's a kicker here, as well. An aging truck fleet in Europe is due for replacement, and this should support sales, too, says JPMorgan Cazenove analyst Alexander Whight, who has an overweight rating on the stock. Aging fleets in North America and Japan are also due for upgrades, he says.

Volvo is also going through an overhaul that will cut costs and boost margins, says Whight. For example, it is rolling out common electrical and suspension systems that should save money because they can be used across brands. And Volvo is introducing new value lines of trucks that should also help sales, says Morgan Stanley's Laura Lembke, who has an overweight rating on the stock.

3. Koninklijke Ahold

To successfully invest in Europe right now, you have to follow three basic guidelines, says Marco Priani, portfolio manager of the Advisory Research International Small Cap Value (ADVIX) fund:

  • Go with companies that have no exposure to the debt of peripheral countries such as Spain and Greece.
  • Go with companies that have solid balance sheets and thus don't have to roll over a lot of debt.
  • Favor companies that get a lot of revenue from outside the eurozone.

Koninklijke Ahold (AHONY), which runs supermarket chains, fits all three, says Priani. It doesn't own shaky government debt. It generates lots of cash, so it has good financial strength -- enough to support a 4% dividend yield, in fact. And while it is based in the Netherlands, where it's one of two main supermarket operators, it gets about half its profits from the U.S. Here, it operates Giant and Martin's Food Markets chains, among others.

Ahold, now trading at less than 10 times earnings, is historically cheap, says Priani. And fears about the company may be overblown.

Besides harboring concerns about Dutch consumers, investors are worried about Ahold because U.S. competitor Supervalu (SVU) suspended its dividend in July and guided down on earnings as sales weakened.

But Barclays analyst James Anstead, who has an overweight rating on Ahold, thinks Dutch consumers will hang in there. And he says Supervalu's problems are company-specific, brought on in part by excessive debt. In fact, Anstead says Ahold might actually benefit from Supervalu's problems by picking up stores from its troubled competitor. Anstead expects Ahold to post substantial dividend growth over the next few years, and possibly announce a stock-buyback plan in 2013 -- both of which would support this stock.