You're Investing Where?

One surprising thing I've learned in my investment career is this: Only a small handful of guys actually have original investment ideas.

I hope that I am on that list. I also hope that I can recognize and learn from the few guys who are on it. You'll know some of these names I'm sure...Warren Buffett and Bill Gross are the popular names here.

Last week, I met with a friend I consider to be on this list. In his 35-year career, he's worked for the world's biggest financial firms and knows all the big-name investors in his field. In the new century, he's been quietly managing a hedge fund, which has shown exceptional returns.

I can't share his name, simply because he didn't give me the OK to mention it in time to publish this letter. But I will share one of his original ideas that has made him a fortune since last summer...

Here's how last week's conversation went:

Steve: So what are you excited about now?

Friend: We've been doing well in Malaysian property stocks.

Steve: Really? I haven't paid much attention to Malaysia since dictator Mahathir tightened the screws on the people a decade ago. Last I looked, it was the right move, as its stock market was down for nearly 10 years.

Friend: That's just it, Steve... Nobody else has paid attention, either. Meanwhile, Mahathir is gone, and we're making money hand over fist...

He's really gone. In March, Prime Minister Abdullah announced two reform packages that went directly against what Mahathir put in place a decade ago. He opened the place up dramatically... He made it easier for foreigners to buy real estate and for locals to invest in foreign assets.

Honestly, I wish I had been paying closer attention. The index fund of Malaysian stocks (EWM) that trades in the U.S. is up 40% since last summer. It's a good way to get exposure to Malaysia. An even better way right now might be through the Malaysia Fund (MF), which trades at a double-digit percentage discount to the value of the Malaysian stocks it holds.

I believe my friend has made his money by investing in companies that will benefit from the special economic zone in Johor, bordering Singapore, where it's much easier to do business free from government interference.

According to The Wall Street Journal, Mr. Abdullah "is signaling [to] foreign investors that Malaysia welcomes their capital and will cut through the red tape to help them invest. That's no small favor. In the World Bank's most recent 'Doing Business' survey, Malaysia ranked 137th out of 175 countries on 'dealing with licenses' and 71st for 'starting a business.'"

If Mr. Abdullah "can light a fire under the [special economic zone] in Johor, that will start a momentum of its own, as other regions start pressuring politicians for pro-investment policies."

"The major goal of my government is to increase private-sector investment," the Journal quoted Mr. Abdullah as saying in March.

My friend – one of the few investors in the world with original ideas – caught on early and has likely made more than 50% since the summer.

I don't think it's too late... with the kind of changes Mr. Abdullah is talking about, we're talking about very long-term improvements in Malaysia. It's becoming investor-friendly, and it's a market that nobody – outside of a few exceptional investors – is talking about right now.

Check out more about the two Malaysia funds at www.etfconnect.com by typing "Malaysia" in the search box, and go from there...

Good investing,

Steve