This MarketBeat interview argues that European and broader international stocks deserve more attention after years of US outperformance, mainly because valuations are lower and quality businesses can still be found outside the US. The guest, Peter Schlaggers of Compounding Quality, recommends diversification away from US-only exposure and then highlights five specific names he thinks are high-quality, often founder-led compounders: Games Workshop, Investor AB, Kelly Partners Group, LVMH, and Chapters Group.
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Peter Schlaggers’ core message is that the long run of US market dominance has made international diversification more attractive, and that Europe in particular now offers a mix of lower valuations and good quality businesses that he thinks are being underappreciated. He repeatedly contrasts US richness versus European relative cheapness, while still conceding that US companies are, on average, better businesses. His basic view is not that Europe is universally superior, but that if a European company is similar in quality to a US peer, the European version can often be bought at a far lower multiple. He grounds that case in cycle thinking: market leadership rotates, and he says the US has outperformed Europe and emerging markets for roughly 16 years, which he describes as unusually long. …
Tactically, the setup favors selective international exposure over crowded US-only positioning, especially in names already discounted on AI fears or regional valuation gaps. Near-term risk is that the rotation stalls and these stocks remain volatile despite the bullish narrative.
Over the next few months, the base case is continued interest in Europe and other non-US markets if valuation gaps and fund flows keep supporting rerating. The key validation is that the named businesses keep compounding earnings while the market gradually looks through the current AI-disruption anxiety.
Structurally, the transcript argues for a less US-centric equity regime where quality can compound across regions, and where mission-critical software, luxury brands, and capital allocators remain durable long-term winners. The lasting implication is that investors should think in geography, quality, and ownership structure rather than assuming US dominance is permanent.
European stocks are significantly cheaper than comparable-quality US stocks, trading at ~14-15x earnings vs ~25x earnings in the US.
Speaker compares valuation multiples of similar-quality companies across regions.
The US has outperformed European and emerging markets for 16 years straight, which is unusually long and historically unsustainable, suggesting a mean-reversion cycle is due.
Historical pattern of 8-year cycles of outperformance between US and international markets.
Games Workshop has extremely loyal, near-addictive clients who stick with the game permanently, giving the company very high pricing power.
Anecdotal story about a passionate Games Workshop player illustrates permanent customer loyalty.
Could the outperformance of European markets over the US continue into 2026?
Peter notes that European markets have been performing well recently and there's growing interest from professional investors in European stocks. He observes that US companies are generally better quality but also much more expensive — a comparable quality company might trade at 25x earnings in the US vs 14-15x in Europe. He's skeptical about big tech valuations and thinks European/international stocks could be interesting for diversification.
What percentage of diversification into international stocks would you recommend for a retail investor?
Peter recommends allocating 40-50% of investable stock assets to non-US stocks for better diversification, noting that markets move in cycles — the US has outperformed for an unusually long 16-year period and historically trends reverse. He cites Warren Buffett's analogy about the tide going out to reveal who's swimming naked.
How have European indexes been performing compared to US indexes over different timeframes?
Peter says over the past 5-10 years and since the financial crisis, US markets have crushed European ones. But on a shorter timeframe, European indices have done quite well — for example the Belgium stock market index is up 30% recently. He notes emerging markets have also performed well and that different regions offer different types of companies, reinforcing the diversification point.
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