Foreign equities have broadly disappointed American investors who have been spoiled by earning double-digit gains by staying at home for much of the past decade. For many financial advisors, some of their most challenging portfolio conversations have revolved around why they should have a large equity allocation—or any allocation—to this asset class.

This dilemma was the topic of a conversation at Morningstar’s virtual investment conference last week. The panelists were three distinguished portfolio managers: Rob Lovelace of Capital Group-American Funds, Rupal Bhansali of Ariel Investments and Rezo Kanovich of Artisan Investments.

One argument in favor of international diversification is that foreign equities are much more reasonably priced than U.S. stocks. Lovelace took issue with that as a generalization, noting that while it was accurate, much of the differential in price-earnings multiples was directly attributable to sectoral composition.

American indexes are heavily weighted to growth industries like technology, healthcare and consumer discretionary stocks. If one compares sectors, the discrepancies aren’t nearly as dramatic.

Moreover, when there are huge gaps within a sector, the reason is pretty obvious, Lovelace pointed out. Take, for example, consumer discretionary companies. The two largest American companies in that group are Amazon and Tesla, both of which sell at lofty multiples and explain why U.S. businesses in this sector sell at a premium double their foreign counterparts.

Even here, Lovelace had questions about the classification of Amazon as a consumer discretionary concern. The e-commerce giant generates a huge share of its cash flow from cloud services, not its online retail business.

Bhansali argued that the debt binge that many American and foreign companies have embarked on in recent years makes certain traditional financial metrics like PE ratios, price-to-book ratios and other yardsticks less relevant. “It’s a head fake to look at PE ratios,” she said.

Investors should look at enterprise value which takes debt into account, she argued. “On that basis, the S&P 500 has already traded above the level it traded at in 1999,” she said. “It’s in bubble territory.”

When one evaluates Amazon and Tesla on the measure of free cash flow, the picture isn’t so rosy, Bhansali continued. In contrast, foreign companies may not be growing as fast, but their cash flow and dividend yields are “significantly higher in an income-starved world.”

So the key question, Bhansali asked, is “what are you looking for and what are you willing to pay for?” Her view is that a “bird in the hand is worth two in the bush.”

Lovelace agreed with Bhansali about the debt problems facing many businesses. “What’s different is that for the last decade, interest rates were falling so companies could manage rising debt levels,” he said. “Now we are at [the] zero bound. The Fed has been very clear. They will only buy the debt of solvent companies.”

Bhansali remarked that when debt gets downgraded, equity holders “pay disproportionately. Look at GE. It will probably pay off its debt.” But shareholders have gotten creamed.

For his part, Artisan’s Kanovich noted that a number of new industries, like bio-processing and instant fashion are emerging on foreign shores and many of these companies are managing finance their growth almost debt-free.

These are industries where foreign small- and mid-cap companies are able to compete. “Small companies have almost no chance to win in capital-intensive industries like commodities,” he added.

Entire global supply chains are being disrupted, creating opportunities for upstarts. In the fast fashion business, manufacturers get paid “almost immediately.” The automotive parts supply business is undergoing a major overhaul, he added.

Kanovich said he thinks the global biotech world could present investors with the most opportunities in the coming decade.