Editor's note: This is the second in a two-part series.
first part of this series
, I described how the speculation mania in China is eerily reminiscent of the dot-com bubble of 2000, as seen first-hand by fund manager David Semple.
While a lot of money could be made by trading within China's bubble, it makes life difficult for long-term investors such as Semple. Nevertheless, there are still good investment opportunities in Asia, he says, and they can be found in some unlikely places.
Semple took over Van Eck's old Asia Dynasty fund back in 1998, in the wake of the Asian Tigers meltdown. In late 2002, he assumed control of the firm's
Emerging Markets fund (GBFAX), which was being run by an outside firm. He brought it back in-house, and has racked up impressive gains since.
That includes a 48% gain in the past 12 months, and 23% so far in 2007. Over three years, he has made 40% a year, well ahead of the Lipper and MSCI emerging markets and Far East indices. One reason: Semple says his fund invests much more in smaller companies than most other emerging-market funds.
"My international targets are to have about 50% of the fund in
companies valued under $1 billion, and 75% under $5 billion," he says. "It's not specifically labeled as a small-cap fund, but I'm a stock-picker, and you have more opportunity to get it right -- or wrong -- as you go down the capitalization curve."
It also means you can get ahead of the crowd. He has made several times his money by getting into obscure companies such as Korea's
before the rest of Wall Street did.
Taewoong, which forges big iron parts such as crankshafts for ship engines and wind turbines, got scant coverage when Semple invested several years ago. Now big banks such as Morgan Stanley issue research on the company.
To watch Farnoosh Torabi' video take of this column, click here
"Over the past couple of years," Semple says, "it's been rerated many, many times, and it's also had great earnings growth." A more recent winner is India's
, which makes seamless pipes for oil and gas companies. It's up 160% since Semple first invested in the company last year.
You can play this game well only if you are managing small amounts of money. Semple is managing some $450 million in emerging-markets investments, including about $100 million in the mutual fund. He says Van Eck is likely to cap his investment pool if it gets too much above $1 billion.
These days, he acknowledges that he's finding it a lot harder to find good investments in these markets. As a result, his cash levels are up to 12%.
"But I've been finding some value in India again," he says. "Brazil looks very good. We're also finding a lot of value in Singapore and Malaysia."
Korean stocks are also cheap, he says.
One obscure area in which he is finding gems: Chinese stocks listed in Singapore. Many have had listings for years and have been largely overlooked in the gold rush.
His fund's latest filings show that Korea was his biggest country exposure, with 14.4%. China was down to just 4.5%.
Semple is willing to go really far afield to find value. An example right now is
Halyk Savings Bank
... in Kazakhstan.
"It's something of a play on the oil and gas industry," Semple explains. "The economy there is doing extremely well." He says the stock looks expensive right now compared with current assets. But he believes it will turn out to be a bargain, because he expects those assets to grow by 50% to 100% a year for each of the next five years.
A bank in Kazakhstan. As they used to say on the TV show
: Do not try this at home.
In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining TheStreet.com in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' bettin