The past couple of weeks have felt like the Cold War was returning.

Senator John McCain heads to Vietnam, where he infuriates the Vietnamese government by saying "the wrong side" won the war. And then there is the Bay of Pigs-style frenzy in Miami with protests against the Elian Gonzalez raid.

Ironically, however, and despite any recent Cold War posturing, some of the best places to be a capitalist these days turn out to be the markets of former Cold War communist adversaries. A quick look at some of the markets that have held up well, while U.S. markets recently tanked, reveals several common themes.

They include markets in countries which once housed Warsaw Pact troops and missiles aimed at the U.S. -- Russia is up 28% this year and the Czech Republic is up 10.4%. China, which actually fought the U.S., is up 34.3%.

To be fair, Sweden is up 7.6% and fits into neither of those categories. And Canada is up 9.7% (though the boys from

Comedy Central's

South Park

did provoke a war with our northern neighbors in their full-length movie.)

Over the same period here at home, the

Nasdaq

is down 5%.

These markets may indeed be capitalist -- or in the case of China, communist in name only -- but they do not march in lock step with the U.S. yet.

The market least effected by the decline in stock prices in the West has been Russia (click

here for Kim Iskyan's explanation of what's been happening in that market). But the Czech Republic has also been a strong performer all year, and it represents a region that many investors have overlooked in recent years, after the euphoria over the fall of communism waned. It may be time to consider taking a second look at it.

David Aserkoff, Eastern European Equity Strategist at

Credit Suisse First Boston

sees increasingly strong economic fundamentals for the Czech Republic. CSFB recently recommended an overweight for the country. One reason he likes it: "Historically, the Czech Republic is out of synch with the rest of the world. Their low correlation means it is a good place to hide" as the rest of the world's markets tumble.

Of greater interest over the long term, however, is the region as a whole. "Eastern Europe is a fantastic area," says Rob Reiner, portfolio manager at

Deutsche Asset Management

. He manages the

(MEUEX)

Deutsche European Equity Fund, which is up 93% this year. (It should be noted that the minimum investment for this fund is $250,000, not making it the ideal choice for many individual investors.)

Reiner's colleague, Oliver Kratz, manages the European emerging markets portion of the portfolio. Kratz is bullish on Central Europe over the next several years as a "convergence play," as Hungary, Poland and the Czech Republic reform their economies, privatize state-owned enterprises, and improve infrastructure in preparation to join the

European Union

. "Unlike most emerging markets where you have a boom-bust, you will see a long-term positive trend" leading to that convergence, he says. He also notes that markets rose in triple digits in Portugal and Greece prior to their joining. This is a long-term play, obviously, as they won't join before 2005.

Despite this long-term potential, at this point, U.S. investors have a scarcity of direct plays in Central Europe. In large part, this reflects the thinness of the market, something which will certainly change in the next few years as more state-owned enterprises are privatized and more start-ups are listed. Currently, very few Central European companies list American depositary receipts in the U.S. One intriguing prospect that does is Hungary's largest telecom company,

MATAV

(MTA)

, which is tapping into a large growth in demand for cellular phones. Though it has fallen 40% since mid-March, Matav is still up 40% since last fall.

Elsewhere in the region,

Netia Holdings

(NTIA)

, Poland's largest telecommunications company, is branching into the Internet and positioning itself as a portal for the country. While Netia's stock has tumbled 70% from its high earlier this year, it is still up 33% since it was first listed last summer, and it has more than doubled since hitting a low last fall.

Investors have a much wider range of choices when it comes to mutual funds. While there are no closed-end funds for either Hungary, Poland or the Czech Republic, there is one for Russia, the

Templeton Russia Fund

(TRF)

, which is up 70% since last fall.

There are, however, several regional closed-end funds investing in Central and Eastern Europe. The best performing has been the

MSDW Eastern Europe Fund

, which is up nearly 80% since last fall. Others have dropped since peaking in March, but are still up since the general climb in Central and Eastern European shares began in the autumn. The

Central European Equity Fund

(CEE) - Get Report

is up 22% since October. Similarly, the

Central European Value Fund

(CRF) - Get Report

is up 21% over the same period.

Finally, a number of open-ended mutual funds invest in the region. The

(LETRX) - Get Report

Lexington Troika Russia fund is currently the best-performing fund in the emerging markets category. It is up 129.6% over the last year and 33.5% since the beginning of 2000. The

(VEEEX)

Vontobel Eastern European Equity fund is up a respectable 6.5% this year (compared to the 1.6% decline in the S&P 500) and the

(EUROX) - Get Report

Regent Eastern European fund is up 5.3%. The largest country position in both funds is Hungary.

In short, the potential in Central and Eastern Europe could warm the heart of the most ardent warrior.

David Kurapka's Global Portfolio column appears Wednesdays and Fridays on TSC. In keeping with TSC's editorial policy, he does not own shares in any companies or mutual funds mentioned in this column. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

dkurapka@thestreet.com.