U.S. markets have dominated for the better part of two decades. But the cycle may be turning—and the valuation gap between American and European equities is getting harder to ignore.
Pieter Slegers from Compounding Quality spends his time searching for businesses with high margins, strong balance sheets, and durable competitive advantages. And increasingly, the best risk-reward setups are showing up outside of the United States.
Why the U.S.-Europe Valuation Gap Matters Now
Slegers doesn't pretend Europe is broadly better than the United States. He's the first to say that U.S. companies, on average, have higher margins and stronger fundamentals. But that's exactly what makes selective European investing so interesting right now. When you find a company in Europe that matches U.S. quality, you're often paying 14 or 15 times earnings instead of 25.
Markets move in cycles. Historically, the United States outperforms international markets for about eight years, then the pattern reverses. The current U.S. streak has lasted roughly 16 years—an unusually long run. Slegers recommends that investors consider allocating 40% to 50% of investable assets outside U.S. stocks for genuine geographic diversification.
As he put it, quoting Buffett: only when the tide goes out do you discover who's been swimming naked. That backdrop frames the stocks he brought to the table.
Games Workshop: The Compounder Hiding in Plain Sight
The first name is one almost no U.S. investor will recognize: Games Workshop (LON: GAW). This UK-based company produces miniatures for tabletop board games—a weird niche, and that's the point. Niche businesses with fanatical customer bases tend to generate the kind of pricing power that shows up in long-term stock charts.
And the GAW chart is remarkable. Games Workshop has compounded at 140x since 1994, making it the best-performing stock in the United Kingdom over that stretch. The company raises prices 5%-6% annually, and customers stay.
Slegers compared the loyalty to addiction: "Once you are a Games Workshop player, you always stick to the game." One anecdote he shared involved a club leader who owned $125,000 worth of miniatures.
The same CEO has led the company for over 20 years, and a pending deal with Amazon (NASDAQ: AMZN) could serve as the next major catalyst. At current levels, this isn't a company where the growth story is over—it's one where the moat keeps widening.
Investor AB: Europe's Answer to Berkshire Hathaway
If you want broad European exposure through a single stock with a proven track record, Investor AB (OTCMKTS: IVSBF) is the name Slegers highlighted. This Swedish holding company has been around since 1916, and the Wallenberg family still owns 20% of the business.
Investor AB operates across three segments: direct stakes in listed European companies like Atlas Copco (OTCMKTS: ATLKY) and ABB (NYSE: ABBNY), private equity activities, and growth investments.
Since 2001, the stock has roughly doubled every five years. Slegers has dined with the CFO and head of investor relations multiple times and says the management team walks the talk.
The case here is simple. If you're looking for first-time European exposure, Investor AB has significantly outperformed the Stoxx Europe 600 over the medium and long term, with a management team whose incentives are deeply aligned with shareholders.
LVMH Moët Hennessy Louis Vuitton: Luxury at a Discount to the S&P 500
LVMH Moët Hennessy Louis Vuitton (OTCMKTS: LVMUY) needs less introduction. The French luxury conglomerate behind Louis Vuitton, Dior, and dozens of other iconic brands is one of Europe's largest companies. Bernard Arnault, the richest man in Europe, owns 50% and keeps buying more shares year after year.
Two dynamics make LVMH compelling at current prices. First, luxury is extraordinarily difficult to replicate—brand equity built over decades doesn't get disrupted overnight.
Second, the company's growth in China and broader Asia remains a powerful long-term tailwind. At roughly 20 to 21 times earnings, LVMH trades slightly below the S&P 500 average while offering fundamentals that are meaningfully better than the typical index constituent. Cheaper and better is a combination worth paying attention to.
The Common Thread Across These Names
Every stock on this list shares a few traits: founder-led or long-tenured management, durable competitive advantages, and valuations that look attractive relative to U.S. peers. The risk is that European markets stay cheap longer than expected. The upside is that a rerating is already underway as more institutional capital rotates toward international equities.
You don't need to go all-in on Europe to benefit. But ignoring the opportunity entirely—especially when quality names trade at meaningful discounts—means leaving diversification and potential returns on the table. That's the setup heading into the rest of 2026.
Watch the full video above for a deeper look at these names (and more).
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The article "3 International Stocks Most U.S. Investors Have Never Heard Of" first appeared on MarketBeat.
