Advisors should avoid the U.S., take profits in Asia and invest in the “slow burn, good-news story” among European equities.

That was the advice portfolio manager John Arnold, chief investment officer and managing director of Dublin-based AGF International Advisors Co. Ltd., gave to more than 50 investment advisors gathered in Toronto Wednesday. Arnold was discussing his reasons for being bullish on the European Union and European equities.

“Europe is the cheapest offer on the street,” the veteran manager said.

Arnold urged advisors to “think like Martians” and not have any preconceived notions about Europe when putting their clients in equities. He said the continent is one of the places in which value still resides in the world equity markets. Trading at a 24% discount to American markets, he also says Euro profits grow faster than those in North America.

Like all good companies, he says, the European Union has a mission statement, in this case “to be the most dynamic and competitive economy.” But before that happens, he says, taxes, especially corporate taxes will probably need to come down across the board to make the EU a better place to do business. Currently there are several countries in Europe with low tax rates that make them sensible places in which to operate businesses, while other countries continue to have high corporate tax rates.

Arnold said he is convinced there is sufficient value in Europe to make it a core holding or strategy, not simply a sector play, in most portfolios.

A new economy is emerging in the EU as the 25 member countries become one federal state, he says. Within that state, Ireland continues as the region’s tiger (Dublin has corporate tax rates of only 12%), the Netherlands is a no-growth economy, and Spain is one of the region’s success stories with lower unemployment and higher GDP per capita since joining the EU.

This new Europe, including Switzerland (not an EU member) makes up 39% of the global economy. In addition to the original EU members, Arnold says many of the 10 new members who entered the union May 1— Cyprus, Czech Republic, Estonia, Hungary, Latvia, Luthuania, Malta, Poland, Slovakia and Slovenia — have a large population of well-educated, unemployed young people to feed both the workforce and the overall economy. He expects a similar injection into the economy and workforce again in 2010 when Turkey joins the EU.