People often ask me where I find my off-the-beaten-path ideas. One of the best ways I've found is to travel and meet with fellow investors. They can be your bird dogs to emerging opportunities.
So I'll be in Cambodia and an investor there will tell me excitedly about the opportunities in Myanmar (Burma). Or I'll be in Mongolia and someone will talk of similar opportunities in Namibia. Or I'll be in Colombia hearing an investor tell me about his recent trip to Haiti and what he found there. These things have all happened to me.
It happened again last night.
I was sitting in a Chinese restaurant in Honolulu with new friends. And as often happens, the conversation turned to investing. One of my dinner mates had his own favourite idea: investing in the Philippines.
It might sound far-fetched, but the proof is in the eating. The Philippine stock market is among the best performing in the world this year. Its economy is one of the few Asian economies that will grow faster this year than last. The Philippine peso is the best-performing currency against the [US] dollar this year, with a 5% gain.
The man putting forth the Philippines idea is an ex-banker, among other things. He has interests and connections in Manila. He has been back in forth dozens of times over the past couple of decades and marvels at the changes.
"There are cranes everywhere," he reports. "New buildings, shops, restaurants. It's incredible. I would never have thought to see that happening."
The usual ingredients are at work, like yeast in bread dough, making the place rise: a young population, large untapped mineral wealth and a change in government.
As to the young population, the median age is only 22.9 years old. It seems all the booming countries I've visited in Asia, from Cambodia to Mongolia, have young populations. The advantage this brings is that most of population is of working age and thus such countries avoid the demographic challenges of the aging West.
Then there is that mineral wealth. There are some 7,000 islands that make up the Philippines. The geological forces creating those islands also brought rich minerals to the surface, where they can be mined.
By some estimates, the Philippines' mineral wealth tops $2 trillion and is perhaps as great as Indonesia's. Gold, copper, nickel, iron ore - it is all here in large, untapped deposits. Billions of dollars in new mining plans are set for approval.
The third force at work is change at the government level. Current President Benigno Aquino swept into office in 2010. Among other things, he has been a big booster of much-needed infrastructure investment. The government has approved road projects worth $1.1 billion.
The government is also encouraging the build-out of things such as the airport and rail system with public-private partnerships designed to ensure a target return to investors.
The country's largest companies are building new office towers and residential communities and shopping malls. Chinese manufacturers, seeking to escape hotly rising costs at home, look at the Philippines as an alternative.
At the sovereign level, Philippine finances are trending well. The country has a rating just below investment grade. It has currency reserves that exceed its external debts. The analogy would be a cash-rich company with more cash than debt.
Yet a 10-year government bond pays nearly 6%. Add in the 5% currency gain and, if you are U.S. dollar-based investor, you've got an S&P-beating 11% gain.
Still, you'd had done better in Philippine equities. The iShares exchange-traded fund - ticker EPHE, which consists of Philippine stocks - is up 25% this year.
Pretty wild, huh?
Now, who knows whether this holds together or not? In my experience, these frontier markets tend to run for a while. One-year wonders are not the norm. The Philippines hasn't had a boom since before the Asian Crisis of '97. So it's been a long time coming.
The whole story just goes to show you once again how this planet of ours is one giant ball of constantly evolving opportunities. New ones emerge and old ones close out.
I'm in Hawaii checking out real estate. It seems an unlikely spot for a bargain-hunter like me to be. The housing market in Honolulu, for instance, is the most expensive in the U.S. The median price is nearly nine times the median income. A normal ratio would be something between two-three.
But you'd be surprised at what you can find even here. There is a huge demand for housing. And there are only so many places downtown where such housing might go. Those few places are tremendously valuable - and I've found a company that owns prime real estate in Honolulu trading for a fraction of its worth.
In my investing career, I've learned it pays to never stop searching. Never give up the hunt for great ideas.
One of my favorite explorers was Roy Chapman Andrews, who led the Central Asiatic Expeditions in Mongolia in the 1920s. (I recently read an excellent biography of Andrews called Dragon Hunter while I was traveling through the country myself.) Andrews had a great quote that I like a lot. He said: "Always there has been an adventure just around the corner... and the world is still full of corners!"
Insert the word "opportunity" for adventure and I think you have an investment mantra to live by.
Chris Mayer for The Daily Reckoning Australia