Europe's Top Stocks Right Now

Stodgy. That's how I used to think of European stocks, what with Europe's aging population, constant labor issues, and historically anemic GDP growth. I used to turn to 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 that hit the market in 2002 is near its highest level ever 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 of the U.S. and Japan in 2007 and 2008.

This growth is reflected in European stocks. The Vanguard European Stock Index Fund, for instance, with top holdings in Rio Tinto (NYSE:RTP), Telefonica (NYSE:TEF), and Daimler (NYSE:DAI), is up 175% since November 2002 -- thoroughly outpacing the U.S.-focused Vanguard 500 Index, which has risen 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 five European stocks, as rated by more than 75,000 CAPS participants:

Source: Motley Fool CAPS.

Please bear in mind that these stocks are not formal recommendations. Instead, they're offered as jumping-off points for further research -- and, what's more, researching five-star CAPS stocks such as these has proven to be an effective tool for investors.

Longest. Name. Ever.
Aktieselskabet Dampskibsselskabet Torm is the complete name of the 119-year-old Danish oil and dry bulk shipping company that has made a strong run-up in the CAPS ratings in the past few months. As recently as June, Torm (for short!) was rated as a mere three-star CAPS stock, but has since won over the hearts and minds of more CAPS investors.

So just how did CAPS investors find out about Torm in the first place? After all, it only trades about 26,000 shares per day on the Nasdaq, so it's not exactly a well-known stock. Perhaps they found it while digging around for alternatives to DryShips, the Greek dry bulk shipper whose stock has gained an astounding 500% in the past year alone.

Or maybe it has something to do with the fact that Torm pays off a 13.2% dividend yield. But high dividend-paying shipping stocks aren't exactly rare. Bermuda-based Frontline (NYSE:FRO), for instance, shells out a 12.5% yield, Diana Shipping (NYSE:DSX) doles out 6.8%, and Eagle Bulk Shipping (NASDAQ:EGLE) pays 7.2%. While these juicy cash payments may look tempting, investors should approach them with caution, as the big payouts may not last forever.

Over on Motley Fool CAPS, 152 of 155 investors who have rated Torm think it will outperform the market going forward. The bullish arguments on CAPS are generally based on Torm's high dividend yield and its low P/E ratio relative to Diana Shipping.

What do you think? Will this Torm continue to beat the market, or will the share price sink? Make your voice heard about Torm -- or any stock, for that matter -- on Motley Fool CAPS, where 75,000 investors are waiting to hear from you. To get started, just click here.