Content provided by Grant Engelbart, CLS Portfolio Manager

Our interest in Europe is no secret. Attractive valuations in the Eurozone and other international markets make a compelling argument to invest abroad, but what about growth?  A great way to invest more granularly in the European recovery is through small caps. While small cap earnings growth has slowed here at home (hence our underweight), revenue and earnings growth in small cap European stocks has been outpacing the U.S., the rest of Europe, and the rest of the world. In fact, year-over-year revenue growth in small-cap European stocks has grown almost 8% faster than the rest of the globe.

Amidst the distractions of geopolitical tensions, the pain of financial crises, and whimsical behavior of market participants, revenue and earnings growth is what ultimately drives stock prices. As evidence, since July 2012, European small caps have outperformed both the S&P 500 and MSCI World Index by over 55%.

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