On the Ground in Asia's Once-in-a-Lifetime Market

"Sir, where are you from?" The driver asked, as we made our way from the airport to my hotel.

"Florida," I said.

"I don't know that place," he replied.

"It's in the United States."

"Ah, yes... America... ok."

"Near Disney World... You know Disney, right?"

"I'm sorry, sir. I do not know that place."

And now we're in Chennai, in southern India, checking out investment opportunities. "You can ask the companies we visit anything you want," our host Rahul Saraogi told us."They're remarkably open."

Rahul is a hedge-fund manager here. Yesterday, he gave us his overview of the Indian investment markets. Then we hit the road to see companies firsthand. We're visiting everything from a high-tech outsourcing company to a low-tech rock business.

The stock market in India busted this year... Stocks are down 40% from their highs. Every company we've seen (and will see) is outrageously cheap.

For example, a company we visited yesterday in Chennai owns many successful businesses... and has no debt. Yet the stock market value is lower than the company's cash in the bank plus its share of another business. Its businesses are growing exponentially. How much could it go up?"In a bull market, two times... three... five... even 10? Buying in at these prices, this is possible." You can't say that often with a straight face. But in this case, Rahul is right. Things are that cheap.

I didn't know what to expect on the ground in India. I haven't seen much yet, so I'm hardly qualified to render an opinion. But so far, it's been fun to see an undercurrent of optimism here...

You see it from the highest levels down to the service in the hotel. Everyone is trying, hard. Everyone seems to know what's at stake... If they try, they can get ahead – fast. Kids here can come out of college and earn more than their fathers ever did – at their very first job.

I asked our hosts about India's "caste" system, where you're born into a social class that historically you couldn't break out of. Rahul said it matters more in the poor North. Here in the South, Rahul explained, most people don't care about whether you're Hindu or Muslim, or what your social class is... People care more about getting educated and succeeding in business. Rahul said the second-biggest expense after food in an Indian household is education.

Rahul believes that, regardless of the current bear market, India is set up for success in the long run. India has generations of experience respecting property rights, and the country's accounting profession is well developed. Business and the stock market have a strong regulatory framework. And English is the language of business and the language that ties the country together.

India has a long tradition with a stock market as well. Indian companies are not like Chinese companies, where you're not sure who really controls the company. It's much more like the States, where the owners of the business have their own skin in the game.

It's not all rosy. Rahul pointed out some of the glaring issues. "Indians succeed in spite of government," he said in many different ways. Fortunately, the government is starting to get out of the way of business... which is great.

Rahul specializes in smaller companies in India. These opportunities seem extraordinary. Many companies are ridiculously cheap, due to what he calls "a scarcity of information and capital." He says India has 6,000 companies trading on the stock market, but only the top 100 get any coverage by the relatively small broker community. So Rahul is like a mini-Buffett, able to pick and choose among the 5,900 that no one's watching.

I didn't expect to be so interested. The big companies still seem expensive. But Rahul has really found some exceptional opportunities – once-in-a-lifetime type opportunities – in the smaller stocks.

Look for more details tomorrow, from my colleague Tom Dyson. Today, we're flying to Bangalore, which is India's high-tech and outsourcing capital. Until then...

Good investing,