According to Pella Funds’ Jordan Cvetanovski, investors should consider quality companies in China and Europe with superior valuations that have performed very well despite the “dire” political and economic situation in those markets.

Over the past two to three months, Pella Funds has been looking for opportunities in China, increasing its exposure to the region by “well over 10%,” said Cvetanovski, the company’s chairman and chief investment officer. The company’s strict focus on valuations has taken it to regions other than the US, such as Europe and Asia.

He told CNBC’s Sri Jegarajah that the company’s China investments may need a stronger boost from the country, which is currently rolling out more fiscal stimulus to revive its economy. Even if such steps are not taken, the investment opportunities selected by Pella Funds have still performed well despite the volatility in the market.

Back in November, China announced a five-year, 10 trillion yuan ($1.37 trillion) stimulus package to address local governments’ debt problems. The government in Beijing has signaled it will provide more economic support in 2025 to boost growth in the world’s second-largest economy.

“Any stimulus we expect from the Chinese authorities would be extremely favorable for these companies, especially given their very low valuations and low positioning by global managers,” Cvetanovski said.

“We’re expecting very strong returns and we think now is the time to prepare for that going into next year given all the fears of tariff wars and whatever,” he added.

Chinese firms priced cheaply that could benefit from fiscal stimulus include robot maker Midea Group, Hong Kong Exchanges and life insurer AIA Groupsaid Cvetanovski.

He said Pella Funds has been monitoring Hong Kong stock exchanges for many years and expects the company to benefit “enormously” from an upturn in markets and new issuance.

“One of the best quality companies in the region is AIA, the Hong Kong life insurer that does business year after year,” Cvetanovski said, adding that the insurer would receive a rating if it were listed in the United States is 50 to 70% higher from day one.

Cvetanovski noted that Pella Funds is a big supporter of the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co. However, the company’s interest in TSMC is a play on artificial intelligence.

Cvetanovski said political unrest had also occurred in Europe, with government collapses in both Germany and France causing great uncertainty in the regional market.

However, according to Cvetanovski, traders’ reluctance to invest in Europe presents a “huge” opportunity for Pella Funds.

The portfolio manager mentioned the French electrical appliance manufacturer Schneider Electric as an example of a company increasing its expected growth rates and margin improvements despite the recent political instability in France.

Schneider Electric is trying to capitalize on Europe’s digital transformation and artificial intelligence boom by investing heavily in its data center business. In July, the company increased its 2024 financial targets due to record sales and improving profit margins.

Pella Funds also recently took a position in a UK engineering company Spirax Groupformerly known as Spirax-Sarco, and to Swedish manufacturer Epiroc – a company that would benefit from a revival of investment in mining, Cvetanovski told CNBC.

“These are the companies that would benefit again if China … provides fiscal stimulus. But on top of that, it’s not absolutely necessary. They’re just cheap and growing, and we can justify what we’re doing.” “We’re paying for it, whereas in general we really can’t justify some of the valuations in the U.S.,” Cvetanovski said.