A year ago, Templeton Global Equity Group’s Norm Boersma, Cindy Sweeting and Heather Arnold penned an article for Beyond Bulls & Bears discussing the signs of a revival in value stocks. With the nascent rally in global value stocks underway, the trio return along with their colleague Tucker Scott to outline where they now see the next pockets of overlooked potential opportunities for patient bargain hunters.

Over the last 18 months we’ve seen the beginning of a rally in value stocks, which have rebounded from 2015’s 20-year lows. In 2016, value stocks outperformed growth stocks by the widest margin in well over a decade.1 We explored some of the reasons for that rally a year ago in this article for Beyond Bulls & Bears.

Now, with the value rally underway, the question we’ve posed to ourselves is: where is the next pocket of long-term potential opportunity for global investors?

We believe equities outside the United States look exceedingly attractive in the current environment relative to US stocks.2 The argument for non-US stocks today in many ways resembles the case for value stocks that we’ve been making over the past 18 months.

Non-US stocks appear undervalued, have underperformed US stocks and possess potential catalysts that could help spur a turnaround.3

There’s also a strong historical relationship between value and non-US equities. Over the past two decades, non-US stocks have tended to outperform US stocks when value starts to work.

There are several possible explanations for this relationship. These include a typically higher representation of cyclical sectors in markets outside the United States and ta generally higher level of operating leverage in these markets attributable to higher fixed costs and less flexible labor. Additionally, we believe the recent valuation discount applied to “riskier” non-US equities creates greater scope for re-rating.

While the value resurgence represents a potentially strong tailwind for non-US equities, there are a number of fundamental pillars of support for the non-US investment case as well.