In April fund manager Laura Geritz spent five days in Chile and Argentina touring a hospital, a port operator, a grocery store and a sporting goods retailer. All told, she met with the CEOs of 25 small publicly traded companies. It's the kind of boots-on-the-ground investing that few institutional money runners practice anymore. Geritz and her partner, Roger Edgley, are in search of stock gems for the $800 million fund they comanage, Wasatch Emerging Markets Small Cap Fund.

"Sixty percent of the companies we saw have no coverage" by equity analysts, says Geritz. Some hadn't seen an investor in a year and a half. "There were no presentations. We just walked through the businesses freely."

So far just one company Geritz had visited made the fund managers' cut: Chilean retailer Forus, although the investment is still pending registration in Chile.

Home for Geritz and Edgley is Salt Lake City, where together with their six researchers they screen an ever expanding universe of 6,000 small foreign companies for candidates worth a visit. Their criteria: companies with market values of less than $3 billion, a 15% revenue growth rate and enough cash flow to support the growth. Their goal: a 20% annual return on each stock over a three- to five-year holding period.

The team is finding India, Brazil and Indonesia to be the most fertile spots for stocks, and most of the picks are in the discretionary consumer spending, financial services and manufacturing sectors. Some, like Colgate-Palmolive ( CL - news - people ) India Ltd., are subsidiaries of big multinationals. A fifth or more of the firms considered have no more than two analysts covering them.

Vetting such outfits goes way beyond spreadsheet number crunching. The team averages about three months on the road annually, visiting places like Chinese factory floors, Brazilian retail showrooms and Philippine gold and copper mines. Geritz recently received eight vaccinations, including one for yellow fever, in preparation for a July trip to Nigeria, Ghana and Kenya, where she will visit 30 to 50 companies.

"We work in an asset class that's still undiscovered," says Edgley. "It's a little bit like being in the jungle. You're trying to figure out different economic behavior, consumer trends--you're a perpetual student, you're never an expert."

During a trip to Brazil two years ago Geritz learned about Hering, Brazil's Gap ( GPS - news - people ) equivalent, while walking through a mall with the CFO of Lojas Renner, a competitor the fund was already invested in. "It fit our process beautifully," says Geritz. "It had great high-quality numbers and a balance sheet with net cash, and at the time it had zero analysts, which is another advantage of our universe--we have a first mover's advantage at finding these names." Geritz had a call with Hering's management and soon added it to the portfolio. Hering's stock has since shot up 480%.

The no-load fund, created in October 2007, has performed among the top 1% in the diversified emerging market category for the three years through March, according to Morningstar. In 2008 Wasatch got hammered with other emerging market funds, down 57%. The next year it was up 118%, and in 2010 its total return was 41%, nearly double the emerging market fund average.

As with other funds that invest in frontier markets, Wasatch's expense ratio is fairly steep at 2.39%. So far this year the fund is flat, mostly because its Egyptian stock holdings--including Egyptian Financial Group (EFG) Hermes Holding, Nationale Société Générale Bank and Paints & Chemicals Industries--were slammed when the Mubarak government was overthrown.

While grassroots detective work on stocks sometimes uncovers hidden treasures, it's also useful in avoiding disasters. Last February when an analyst went to visit a farm equipment factory in mainland China, he discovered that not even the locals had heard of it. It turned out to be an empty building with five men sitting on the ground out front smoking cigarettes.

The risk of buying into duds and even outright scams is inherent when investing in untrodden regions of the globe, where businesses practices run the gamut. That's why Geritz spreads her bets. "A portfolio of 20 countries that have relatively good fiscal health versus a one-country developed market portfolio should be less risky."

Still, hitting the road is essential. Last July Geritz drove in a Toyota ( TM - news - people ) Land Cruiser to the bottom of a copper mine in the Philippines, where she spent eight hours talking with workers and exploring the operation. The visit plus the stock's rising price was enough to convince Geritz and Edgley that miner Philex was fully valued. The fund sold its shares soon after.

More recently Singapore's Hsu Fu Chi International Ltd. caught Geritz's eye. The $2.5 billion (market cap) family-owned company sells confectionery goods in China. It's trading at 21 times earnings.

At a time when emerging markets like Brazil and China have been all the rage among investors, Edgley insists small caps remain an overlooked sector. He says, "We realized a few years ago that investors weren't paying enough attention to emerging small caps." A few more years with 40%-plus returns should change that.

#### Off The Beaten Track

While many have rushed into China, Wasatch Emerging Markets Small Cap is finding bargains in India, Indonesia and Brazil. Still, its managers are hedging their bets. The fund holds 116 stocks in 23 countries.
Company / Country | Business | Total return Year-to-date | % of fund*
Mr Price Group / South Africa | budget clothing and home product retailer | -4.9% | 2.2%
Holcim Indonesia / Indonesia | subsidiary of Swiss multinational cementmaker | 5.5 | 2.1
Colgate-Palmolive India LTD / India | Personal hygiene products | 6.7 | 1.9
Mahindra & Mahindra Financial Services / India | consumer lender in rural and semirural india | -10.8 | 1.9
Clicks Group / South Africa | food and drug retailer | -1.8 | 1.8
Harum Energy / Indonesia | operates 2 coal mines in eastern indonesia | 10.8 | 1.5
Bata India / India | shoe manufacturer | 37.5 | 1.4
Dah Chong Hong Holdings / Hong Kong | luxury car distributor | -2.8 | 1.4
Restoque Comercio e Confeccoes de Roupas / Brazil | luxury fashion and home products designer | 30.7 | 1.4
Tegma Gestao Logistica / Brazil | transports cars for auto industry | 5.5 | 1.4
Price performances are in U.S. dollars and as of June 2. *As of Mar. 31. Sources: Interactive Data via FactSet Research Systems; www.wasatchfunds.com.