(MONEY Magazine) – Uncertain. That's the best that can be said about the outlook for the world's biggest equity markets. MONEY chief investment strategist Michael Sivy warns that U.S. stocks may pull back as much as 20% within 12 months (see the story on page 68). In Europe, the Socialist election victory in France and the economic problems in Germany have raised questions about whether the continent's major countries will make good on their promise to switch to a unified currency--the euro--in 1999. As a result, European stock markets are as jittery as a June bride. In Japan, last April's increase in the consumption tax rate from 3% to 5% will likely slow the economy, warns Drew Collins, senior vice president of Federated Global Research in New York City.

So where in the world should you invest your money? The surprising answer: all over. Investing globally reduces your risk over the long term. Why? Because although major markets sometimes move in tandem, they don't always do so. In 1994, for instance, while Standard & Poor's 500-stock index returned a paltry 1.3%, Japan's Nikkei average rose a princely 26.6%. "U.S. exchanges account for less than 40% of the world's market capitalization, so to tap the other 60% you have to search beyond U.S. borders," says Leila Heckman, managing director of Smith Barney's Global Asset Allocation group in New York City.

But you can't just throw darts at an atlas, of course. To help you choose companies with the best long-term growth potential regardless of what happens in their home stock markets, we asked more than a dozen international investment pros for their best picks. To build in a margin of safety, we required that each stock trade on U.S. exchanges in American Depositary Receipts (ADRs) and have a price/earnings ratio on forecast profits at least 7% below that of peers whose shares are listed on U.S. exchanges. We found stocks that met these criteria in England, France and Japan. All trade on the New York Stock Exchange and are profiled here in descending order of their projected 12-month returns:

--Glaxo Wellcome (ticker symbol: GLX; recently traded at $41.75; 2.7% yield). With Glaxo's Zantac ulcer drug and Zovirax herpes medication losing patent protection this year, analyst James Keeney at Rodman & Renshaw in Boston forecasts sluggish 2% earnings growth in 1997 for this $13.6 billion London company. But he notes that Glaxo has "60 or so new drugs soon to be filed for approval with the FDA." Already on the market are Imitrex, a migraine remedy, and Serevent and Flovent, which prevent asthma attacks. Keeney expects the three drugs to rack up combined sales of $3 billion or more for 1997. Bill Wilby, head of global investing for Oppenheimer & Co., also points out that Glaxo, maker of AIDS medications Epivir and Retrovir, "is the key player in the triple-drug cocktail for AIDS patients."

Given those strong long-term prospects, Glaxo currently sells at an 11% premium to the market, vs. 29% for the average drug stock. Nonetheless, "Glaxo is a good value," stresses Keeney, who expects the stock to soar to $55 within 12 months for a 34% total return.

--Alcatel Alsthom (ALA; $25.25; 1.1%). Three years ago, investors figured this $34 billion Paris telecommunications and electronics equipment maker had permanently blown its circuits. Since then, however, Alcatel has cut its work force by 3%, pared its debt 34% and reduced the prices of its advanced digital switches about 10% annually. Result: Last year net income jumped 111%, and it is expected to climb another 40% this year. "In less than two years, CEO Serge Tchuruk turned the company around 180 degrees," says analyst Theo van Lingen at the investment research firm Goldis-Pittsburg in Garden City, N.Y. Meanwhile, analysts predict that sales of Alcatel's SDH technology, which allows data to be sent over networks as much as 100 times faster than older systems, will rise 35% by the end of this year.

The stock started to wobble precariously just before the French elections but is now trading at 4.6% above its pre-election high. One reason: Investors think the new government will have a limited impact on the company's fortunes. With the stock now selling at 14.4 times forecast earnings, vs. telecommunications companies' average of 23, Sean Faughnan at J.P. Morgan Securities in London feels that Alcatel is undervalued. He expects the shares to rise 20% to $30 within 12 months.

--Sony (SNE; $88; 0.4%). This $45.7 billion Tokyo company is a world player in consumer electronics as well as in entertainment. Its Sony Pictures Entertainment is No. 1 in U.S. film box office receipts, chiefly because of Jerry Maguire, which has grossed $153 million since its release last December. Analyst Christopher Joseph at Value Line expects the entertainment division, including music, to bring in $9.5 billion for the fiscal year ending March 1998. Another growth area is likely to be digital video disks, which store seven times more data than traditional compact disks. Joseph estimates that sales of Sony's digital products, which also include digital video camcorders and satellite broadcasting services, will grow 10% to 11% through 1998.

All told, Morgan Stanley Dean Witter analyst Takatoshi Yamamoto expects profits to climb a heady 15% annually over the next five years. Though the stock trades at 26 times forecast earnings, Yamamoto points out that other Japanese blue chips like Sharp and Matsushita trade at P/Es of 34 and 32, respectively. He expects Sony's shares to hit $100 within 12 months for a total return of 14%. In a phrase they probably hear much too much around Sony, that will show investors the money.

--Karen Cheney