Do you remember the old commercials for brokerage firm E.F. Hutton back in the 1970s and early 1980s? They always ended with the announcer saying, “When E.F. Hutton talks, people listen.”

In every advertisement, a pair of affluent-looking friends or co-workers would be discussing investments in some noisy setting, like at a party or on a city sidewalk. As soon as one of them delivered the line, “My broker is E.F. Hutton, and E.F. Hutton says…,” there’d suddenly be total silence and the camera would pan back to show everyone within earshot leaning over, straining to hear.

That’s exactly how it is now for another investment guru who has far outlasted E.F. Hutton, which ended up merging itself out of existence more than 20 years ago. This expert, widely considered the “Dean of Emerging Markets,” is the executive chairman of the emerging-markets group at Templeton Investments, where he has worked for nearly 25 years. He oversees about $50 billion in a variety of diversified and region-specific mutual funds that cover the entire emerging-markets spectrum.

I’m referring to Mark Mobius.

It’s easy to see why Mobius has the “E.F. Hutton effect” on people when you check out the performance of the mutual funds he manages. The closed-end funds Templeton Dragon (NYSE: TDF) and Templeton Emerging Markets (NYSE: EMF), for instance, have returned an average of 20% and 17.6% a year, respectively, in the past 10 years. The open-end fund Templeton China World A (TCWAX) has averaged a 17.3% return in the same period.

These funds invest mainly in more advanced emerging markets such as China, Brazil, India and Taiwan, to name a few. If you like emerging markets, but don’t want to own individual stocks and prefer areas where sustained growth seems much more certain, then consider the Templeton funds I mentioned above. Oppenheimer Developing Markets (ODMAX) and DFA Emerging Markets Portfolio (DFEMX) are two other top-notch possibilities. (Just a note: I wouldn’t worry much about sales charges, which can be as high as 5.75%, depending on the fund.) To me, a great fund with a sales charge is far more preferable to a mediocre or poor no-load fund.

While Mobius strongly believes in China and other more established developing countries, he sees just as much exciting growth potential in many of the newer emerging markets, often referred to as “frontier markets.” Here are three of his favorite frontier markets, along with ideas on how to invest in them.



Africa
Although Mobius admits many investors still see Africa as a backward play, he says the region’s outlook is very positive. The continent has some of the world’s largest deposits of natural resources such as oil and all kinds of precious metals, only a fraction of which have been tapped. This has attracted China, India and other more advanced developing nations, which need the resources to maintain their rapid expansion. Another important fact is Africa has the type of population crucial for economic outperformance — young and growing.

Analysts predict Africa’s economy is likely to expand an average of 7% a year in the next two decades. At this rate, gross domestic product (GDP) would more than triple to $5.8 trillion in 2030, from $1.6 trillion now.

Templeton doesn’t have a fund devoted solely to Africa. But Templeton Frontier Markets A (Nasdaq: TFMAX), which has been managed by Mobius since inception on Oct. 14, 2008, has nearly two-thirds of assets in Africa and the Middle East. Market Vectors Africa Index ETF (NYSE: AFK), an exchange-traded fund (ETF), and the open-end fund T. Rowe Price Africa and Middle East (TRAMX) are two other worthy Africa plays. All of these funds place large bets on the best African economies, including South Africa, Nigeria and Kenya.

Thailand
Analysts at Goldman Sachs and Credit Suisse are telling investors to trim back on the stocks of Thai firms because of a heightened risk for political turmoil in the wake of recent elections. But this doesn’t faze Mobius, who sees Thailand as one of today’s best emerging markets. He often points out that politics have been volatile there for nearly 90 years, yet they never seem to hinder the economy for long. Indeed, GDP growth was about 8% last year, and economists predict a 4.5% growth rate through 2020.

Mobius likes Thailand for its relatively free economic system, educated populace, ongoing privatization of state companies (like Thai Airways), and vibrant banking and energy sectors. He manages a fund devoted exclusively to Thailand, but it isn’t available to U.S. investors at this point. Instead, I suggest the iShares MSCI Thailand Investable Market Index ETF (NYSE: THD). The fund, which is named after the index it tracks, holds 85 stocks, representing 99% of Thailand’s publicly-available stock market capitalization.

THD isn’t a Mobius fund, but it has delivered Mobius-like returns — an average of 17.8% in the past three years. The fund’s yield is currently 2.4%.

Saudi Arabia
Saudi Arabia is a great place to invest, according to Mobius, not only because it has one quarter of the world’s proven oil reserves, but because of greatly-increased government spending to benefit the public. Since March, for instance, King Abdullah has allocated about $165 billion for education, new homes, a higher minimum wage and other public projects to help keep widespread unrest in the Middle East from taking hold in Saudi Arabia. The country has fast-growing information technology and solar-power industries, too. GDP, which climbed 3.7% last year, could easily rise by at least this same rate through 2020, in my opinion.

Mobius believes Saudi Arabia is gradually embracing a greater level of foreign investment in its public financial markets. I’m not aware of any mutual fund or ETF that invests exclusively in Saudi Arabia. However, U.S. investors can certainly gain access through Templeton Frontier Markets A or a number of other ETFs such as PowerShares MENA Frontier Countries (Nasdaq: PMNA), which invests in the Middle East and North Africa, and Market Vectors Gulf States (NYSE: MES).

Action to Take –> Because frontier markets like Africa, Thailand and Saudi Arabia are likely to expand more quickly than average in the long-term, I strongly suggest making them a meaningful part of a growth-oriented investment portfolio. Mutual funds and/or ETFs are the best ways to invest at this point, since frontier market stocks aren’t sufficiently available on domestic exchanges.

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