I haven’t written about Nicholas Vardy and his Global Stock Investor very many times, but several folks sent in his latest teaser ad and it piqued my interest a little bit. So let’s have at it, shall we?

As you might imagine, Vardy focuses on foreign stocks — though he’s aiming for US investors so he doesn’t typically recommend stuff that it’s difficult for mainstream investors to buy, so we often see ADRs as his picks.

But this time, he’s teasing a whole country …

“BIG news… I just issued a BUY yesterday for a remarkable investment opportunity in a nation that is re-emerging as one of the world’s most exciting developing countries.

“You have all heard the rage over emerging markets and how much money there is to be made. The catch, of course is… IF you pick the right investment.

“This country has made a tremendous comeback the past few years as you will read below. Their recent successes have been reflected in the performance of their stock market. The recent pull back in global markets notwithstanding, their Stock Exchange remains up over 50% in 2009.”

So, that might tell you what this country is … but if not, let’s look at a few more clues:

“As one of the world’s largest Muslim nations, this country is among the top 10 most populous countries in the world after China, India, and the United States. Already among the top 20 economies in the world in terms of GDP, it’s also one of the world’s largest palm oil producers, and perhaps the world’s second-largest coal exporter. With its abundant natural resources, it has recently benefited tremendously from the China-driven commodities boom.

“Their economy is also on track to grow about 4% this year, making it only one of only a handful of major economies — including China and India — that the International Monetary Fund expects to expand in 2009. Meanwhile, it is also enjoying a new found popularity among foreign multinationals like Volkswagen and British American Tobacco.

“Much of the credit for it’s recent rise goes to the president, who has virtually stamped out Islamic terrorism; ended its civil war with renegade provinces; brought state spending under control; and launched a popular anti-corruption drive, jailing senior politicians and central bank officials.

“This is a remarkable turnaround for a country that was, until the last few years, widely viewed as the world’s biggest basket case. Before then, it was best known for its corruption, Islamic terrorism, and one of the world’s longest-running civil wars. Foreign investors stayed clear and Western analysts viewed it as the next Pakistan, rather than the next China.

“From a Basket Case with a Troubled History…to ‘Safe Haven’ During Global Financial Crisis”

So … we needn’t make the Thinkolator work too hard today, this is clearly teasing Indonesia, and it’s certainly true that Indonesia is often the world’s overlooked major emerging country — if you don’t know much about Indonesia, it is the world’s most populous muslim country, and just below the US in terms of population, with about 240 million souls spread across the thousands of islands in the Indonesia archipelago (though more than half of them live on Java).

And yes, the government — despite fears from the recent bomb blast, and concern that the East Timor separatist movement or other separatists might again get some traction — does still say that they’re targeting GDP growth of at least 4% (Though that’s a drop from the near-6% growth they expected as of last Summer).

I’m no expert on Indonesia, but it has been an interesting history, from an investment perspective — the country was almost isolationist under Suharto for decades, and opened up to Western and regional (esp. China, Japan and Singapore) trade in the last ten or twenty years, taking advantage of great stores of raw materials and a vast population of low wage workers. The economy might not have yet advanced to the point that you’d compare them to the BRIC nations, but it wouldn’t be shocking to see them supplant Russia if things keep on as they have been, perhaps we’ll see talk of the BIIC nations one day.

We didn’t get any specific clues about Indonesian investments that Vardy might favor, but I’ll tell you about three that are the likely candidates, two funds and one stock.

With any emerging economy you can usually look for a few big companies that make up the majority of the stock market, and it will usually be one major natural resource company, a big telecom firm, and one or two big banks. That’s roughly how it goes for Indonesia, too, though the lead position in the market goes to PT Astra, a conglomerate … the biggest company that it’s easy for US investors to buy is Telkom Indonesia (TLK), the major telecom firm that I wrote about for a different teaser back in May.

But if you want exposure to the whole of the Indonesian market, which makes sense if you’re buying into this story that Indonesia in general will be rising on the world stage (after all if you pick a single stock you take on dramatically more risk that the stock’s individual performance will fall behind its economy).

So if you want exposure to Indonesia, the other two easy ways are exchange traded funds — one index, and one closed-end fund.

The index fund, which aims to keep pace with an index of companies that are major players in the Indonesian economy, is the Market Vectors Indonesia Index ETF (IDX). This index is led by PT Astra and Telkom Indonesia, along with a number of big resource companies and banks, and it carries a reasonably small expense ratio of .7% (probably will go up in a year or so, it’s subsidized at the moment).

The closed-end fund is the Indonesia Fund (IF), which in the pre-ETF days was the only real way to trade a vehicle with broad exposure to Indonesia. It currently trades at about a 5% discount to its net asset value. During its history this fund has a few times traded at a premium to net asset value, but most of that was before there was a low-cost index fund as competition, the 5% discount is probably about average over the last five years or so (that’s just from eyeballing the chart, I didn’t do the math — when the global economy tanked the discount approached 20% for a brief while).

IF has much the same portfolio as IDX, but it’s more top-heavy — it’s almost 20% in Telkom Indonesia, almost three times the weighting that it gets in the index, and it holds outsize positions in Astra and a bank or two as well. IF also pays a small distribution dividend, which IDX didn’t do last year.

On the other hand, the Indonesia Fund also has a much larger expense ratio than the Index ETF (1.6% vs. .7%), so you’re counting on their ability to manage the fund to beat the index, with probably a large part of that bet resting on the shoulders of the big telecom company.

Or, of course, you could always go with the American company that is the single largest taxpayer in Indonesia — Freeport McMoran (FCX), which operates its massive gold and copper mine in Papua, Indonesia and is a huge employer … if you look at a chart of the Indonesia Fund, the Index ETF, TLK, and FCX, it’s actually TLK that has had the moderate and steady performance — both funds and FCX do a lot more swinging up and down … or at least, they have done over the past 6-24 months or so.

So what do you think? I don’t currently have any exposure to Indonesia, but the arguments for their ascendance certainly make sense — political stability is one big wild card, as are agricultural and metal commodity prices, but the economy certainly has room to grow whether or not the world economy is growing, just to catch up with development in the rest of the emerging world. If you’ve got a favorite way to play Indonesia, or the other emerging markets … or if you’ve got any information to share about the investments I’ve mentioned above, please let us know with a comment below.

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