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 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, for instance, with top holdings in Nokia (NYSE:NOK), Barclays (NYSE:BCS), and UBS (NYSE:UBS), is up 195% since October 2002 -- thoroughly outpacing the U.S.-focused Vanguard 500 Index, which has risen 98%.

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 70,000 CAPS participants:

Company

Country

CAPS Score
(out of 5)

CGG Veritas (NYSE:CGV)

France

*****

iShares MSCI Austria Index (NYSE:EWO)

Austria

*****

ICON plc (NASDAQ:ICLR)

Ireland

*****

Eni S.p.A. (NYSE:E)

Italy

*****

Banco Bilbao Vizcaya Argentaria

Spain

*****

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.

Edelweiss, edelweiss...
They're not just skiing in the Alps these days. The iShares MSCI Austria Index ETF has returned an astounding 41% each year on average since October 2002. That's enough to turn a meager $1,000 investment into $5,573 five years later! By comparison, the iShares MSCI EAFE Index, which measures the condition of overseas markets, returned just 23% per annum over the period. 

So what's attracting U.S. investors to this ETF? Other than the scorching returns, it may be that no Austrian-headquartered company trades on a major U.S. exchange, attracting investors interested in a hedging instrument against U.S. market/dollar exposure.

On the other hand, investors should also know that the fund holds only about 22 stocks, with roughly 75% of its assets tied up in just 10 of those companies. In fact, as of Sept. 30, fully 17.45% of the fund was invested in the financial services company Erste Bank der Oesterreichischen. (Try saying that name five times fast!)

Over on Motley Fool CAPS, all 140 investors who have rated iShares MSCI Austria think it will outperform the market going forward. The bullish arguments on CAPS are generally based on Austria's strong banking community and its geographical proximity to the growth occurring in Eastern Europe.   

What do you think? Will this ETF continue to beat the market, or will it be a particularly cold winter in the Alps? Make your voice heard about this Austrian ETF -- or any stock, for that matter -- on Motley Fool CAPS, where 70,000 investors are waiting to hear from you. To get started, just click here.

Motley Fool Global Gains is here to help you navigate the complex international stock markets. A free, 30-day trial to our international investing service is yours with just a few clicks.

Fool contributor Todd Wenning has long dreamed of playing lead guitar for Jesse & the Rippers. He owns shares of the Vanguard European Index ETF. The Fool's disclosure policy backpacked across Europe after college and returned with its integrity intact.