Curtis Freeze’s hedge fund soared 210% last year… making it the world’s second-best performing hedge fund in 2010.

How did he do it?

He bought small-company stocks in “Country X.”

Here’s what he told Bloomberg two weeks ago:

I’m still very bullish on [Country X]… so few people are looking around [Country X] for ideas.

As long as people are skeptical, that means there’s opportunity. If the consensus is that [Country X] is going in one direction – up only – I’d be much more worried.

[ad#Google Adsense]Right now, people are skeptical. And nobody is there looking. But Curtis has “two dedicated analysts on the road constantly” in Country X.

Almost a year ago, I quoted Curtis Freeze in my True Wealth newsletter. Here’s the quote:

[Country X] is the only country in the world that has 200 listed companies trading below just the cash on the books… 200 companies you could virtually buy for free. These are valuations we’ve never seen in the history of [Country X] and maybe not the history of investing.

I summed it up in that newsletter by saying, “There is no greater value in the world… and possibly in history, than small stocks in Country X.”

Curtis put his money where his mouth is, buying smaller companies in Country X – and his fund rose 210%. The great part today is…

Small-cap stocks in Country X are as cheap today as they were when I wrote about them a year ago. Check it out:

Based on the Nasdaq Index, U.S. stocks now trade at over three times book value and over two times sales. In other words, small-cap stocks in Country X would have to rise FOURFOLD to equal U.S. valuations. Country X is CHEAP.

In True Wealth, we look for three things in an investment: cheap, hated (or ignored), and an uptrend.

Small stocks in Country X basically set records for the first two categories. For cheap, we’re at valuations “never seen in the history of investing.” And for ignored, the market is not far off of 25-year lows. The uptrend is there, too… Shares of my favorite way to play this idea bottomed in October 2008 and March 2009 and are now at three-year highs. And they’re still cheap!

To end the suspense, Country X is Japan…

For me, buying small Japanese companies today is like buying gold in 2002. In 2002, investors were completely apathetic about gold. I couldn’t get subscribers interested in the least. They wanted the next hot dot-com… and I wasn’t going to give it to ’em. Don’t make that mistake with small Japanese stocks today. If you missed gold then, don’t miss this now.

My preferred way of playing this is through shares of the WisdomTree SmallCap Japan Dividend Fund (DFJ). It’s easy to buy… It trades like a stock in the U.S. And it holds hundreds of small Japanese companies.

This fund, as its name suggests, is full of small dividend-paying stocks. Dividend-paying companies are cash-generating companies… which is just what we want. DFJ has literally hundreds of percent upside over the next five years, and the downside risk is pretty small.

[ad#ChinaBlankCheck]Curtis Freeze earned investors 210% last year in small Japanese stocks. And the value is still there today.

Look… investing simply comes down to risk and reward… to stacking the odds in your favor.

In this trade, our upside is hundreds of percent… And if we use a 25% trailing stop, we’re only risking 25% in the worst case.

Hundreds of percent upside, while risking only 25% on the downside? Odds like that don’t come along often. You ought to take them…

Good investing,

— Steve Sjuggerud

[ad#jack p.s.]

Source:  Daily Wealth