Europe's Top Stocks Right Now

Stodgy. That's the first word that used to pop in my head when I envisioned European stocks. I thought of Europe's aging population, its constant labor issues, and its historically anemic GDP growth, and I opted to look at higher-growth regions like Asia and South America.

But I've changed my opinion on European stocks in recent years. You may want to take a second look, too.

A breath of fresh air
A lot has changed in Europe over the past five years. The euro currency hit the market in 2002, and it's currently at its highest level against the dollar and yen. Former Soviet-bloc countries like Lithuania, Estonia, and Latvia joined the European Union in 2004. And pro-market leaders have been elected in Germany and France.

The trends are so positive, in fact, that The Economist expects GDP growth in Europe to surpass that in both America and Japan in 2007.

That growth has been reflected in European stocks. The Vanguard European Stock Index (VEURX), for instance, with top holdings in GlaxoSmithKline (NYSE:GSK) and Vodafone (NYSE:VOD), is up 144% since July 2002 -- thoroughly outpacing the U.S.-based Vanguard 500 Index (VFINX), which has risen just 72%.

Investors participating in Motley Fool CAPS, the Fool's free investor-intelligence community, have also noted the promise of European markets. Here are this month's top European stocks, as rated by more than 60,000 CAPS participants:

Please bear in mind that these stocks are not formal recommendations, but are offered as jumping-off points for further research.

The Russian bear is growling
Russian mining and steel conglomerate Mechel enters this month's list in spite of a general sell-off in the Russian markets so far this year, with Russia's RTS index down 3.5% in dollar terms year to date. Mechel has largely bucked this trend, however, and is up 65% for the year while presently sitting 8% off its 52-week high.

Competitors such as Arcelor-Mittal (NYSE:MT) and Rio Tinto (NYSE:RTP) are also up for the year, but the growth story for Mechel centers on the company's grip on the Russian market for steel, iron, and coal. According to the company's website, Mechel "is the largest producer of specialty steels and alloys in Russia, producing 39% of total specialty steel output."

And that's saying something in an emerging economy that grew its real GDP at an average of 6.4% per year from 2002-2006. Commodities like steel, iron, and coal will certainly be needed if the Russian economy is to continue its torrid pace.

Over on Motley Fool CAPS, 215 of the 216 investors who have rated Mechel think it will outperform the market going forward. The bullish arguments on CAPS are generally based on Mechel's valuation, market opportunity, and substantial annual dividend, which was recently increased to $2.27 per American depositary receipt (ADR) share.   

If you can handle the political risk in Russia, Mechel may merit additional research.

What do you think? Will Mechel continue to beat the market going forward, or will it be an especially cold winter for the Moscow-based company? Make your voice heard on Mechel -- or any stock for that matter -- on Motley Fool CAPS, where 60,000 investors are waiting to hear from you. To get started just click here.

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Fool contributor Todd Wenning has long dreamed of playing lead guitar for Jesse & the Rippers. He owns shares of the Vanguard European Index ETF. GlaxoSmithKline is a Motley Fool Income Investor choice. Vodafone is an Inside Value pick. The Fool's disclosure policy backpacked across Europe after college and returned with its integrity intact.