TheChek News Flow

Russia was acting more like an adversary than a partner, NATO's Supreme Allied Commander Europe, U.S. Air Force General Philip Breedlove said, and the 28-nation alliance should rethink the positioning and readiness of its forces in eastern Europe.

Russian troops, using armored vehicles, automatic weapons and stun grenades, seized some of the last military facilities under Ukrainian control on Saturday in Crimea, the Black Sea peninsula that Russian President Vladimir Putin formally annexed the day before.

Breedlove was one of several Western officials and politicians to warn on Sunday that Russia may not stop there in a crisis that has taken East-West relations lurching back towards the Cold War since pro-Western protests in Ukraine ousted Moscow-allied President Viktor Yanukovich last month.

"The (Russian) force that is at the Ukrainian border now to the east is very, very sizeable and very, very ready," the NATO commander told an event held by the German Marshall Fund think-tank.

U.S. President Barack Obama's deputy national security adviser Tony Blinken said the build-up might just be aimed at intimidating Ukraine's new pro-Western leaders but that Russia could invade the country's mainly Russian-speaking east. "It's possible that they are preparing to move in," he told CNN.

Russia said it was complying with international agreements and had no plans to invade. It has called the soldiers who took over Ukrainian bases in Crimea "self defense forces".

The United States and the European Union have targeted some of Putin's closest political and business allies with personal sanctions and have threatened broader economic sanctions if Putin's forces encroach on other eastern or southern parts of Ukraine with big Russian-speaking populations.

Ukrainian marine standards were still flying on Sunday alongside the Russian flag at the Crimean base of Ukraine's top military unit in Fedosiya, but the Ukrainian troops were getting ready to leave after the Russian military takeover.

"Our only issue is that we want to leave this place with honor, weapons and vehicles," one Ukrainian soldier said.

Blinken said Washington was considering all requests for military assistance from the government in Kiev, but that it would be unlikely to prevent an invasion of Ukraine, which is not part of NATO. Breedlove said the military alliance needed to think about its eastern members, particularly the former Soviet Baltic states of Lithuania, Latvia and Estonia.

"We need to think about our allies, the positioning of our forces in the alliance and the readiness of those forces ... such that we can be there to defend against it if required, especially in the Baltics and other places," Breedlove said.

"VERY WORRISOME"

Breedlove said NATO was very concerned about the threat to Transdniestria, which declared independence from Moldova in 1990 but has not been recognized by any United Nations member state. About 30 percent of its half million population is ethnic Russian, which is the mother tongue of an overall majority.

Russia has 440 peacekeepers in Transdniestria plus other soldiers guarding Soviet-era arms stocks.

Russia launched a new military exercise, involving 8,500 artillery men, near Ukraine's eastern border 10 days ago.

"There is absolutely sufficient (Russian) force postured on the eastern border of Ukraine to run to Transdniestria if the decision was made to do that, and that is very worrisome," Breedlove said.

The speaker of Transdniestria's parliament has urged Russia to incorporate the region, which lies to the west of Ukraine. The new leaders in Kiev have said Moscow could seek to link up pro-Russian regions in Moldova and Georgia to Ukraine's east in a destabilizing southern corridor with Crimea in the middle.

Russia's Deputy Defence Minister Anatoly Antonov was quoted by the state's Itar-Tass news agency as saying Russia was complying with international agreements limiting the number of troops near its border with Ukraine.

Moscow's ambassador to the European Union, Vladimir Chizhov,

said Russia did not have "expansionist views". Asked to give a commitment that Russian troops would not move into Ukrainian territory outside Crimea, he told Britain's BBC. "There is no intention of the Russian Federation to do anything like that."

U.S. Senator John McCain, a Republican foreign policy specialist, told the same BBC show that Putin's actions in Ukraine were akin to those of Adolf Hitler in 1930s Germany.

"I think he (Putin) is calculating how much he can get away with, just as Adolf Hitler calculated how much he could get away with in the 1930s," McCain said.

"PANDORA'S BOX"

Germany's Foreign Minister Frank-Walter Steinmeier underscored the huge potential repercussions of Russia's bid to redraw national borders in Europe.

"I'm very worried the unlawful attempt to alter recognized borders in our European neighbourhood, 25 years after the end of the Cold War, will open Pandora's Box," he said.

Belarussian President Alexander Lukashenko, a close ally of Russia, accepted on Sunday that Crimea was now "de facto" a part of Russia, but said the annexation set a "bad precedent".

Speaking to reporters in Minsk, Lukashenko said Ukraine, which shares a long land border with Belarus, should remain "a single, indivisible, integral, non-bloc state".

Western sanctions lost some of their sting on Sunday when Russia's SMP bank, whose main shareholders were targeted by U.S. sanctions, said Visa Inc and MasterCard Inc had resumed payment services for its clients.

The bank said it was glad the two biggest international payments systems had listened to its arguments to reverse Friday's suspension of services as it was wrong to target the bank, which was not itself subject to any sanctions.

A spokesperson for Mastercard confirmed it was again serving clients of the bank but did not say why it reversed its decision. Visa said it had been informed by the U.S. government to lift sanctions against SMP bank and two other Russian banks because they did not meet the criteria for sanctions.

Putin and Russian media had mocked the sanctions, which did not stop the Russian military completing its takeover of Ukraine's military bases in Crimea. Russia's defence ministry said on Sunday that its flag was now flying over 189 Ukrainian military installations on the peninsula.

A referendum held a week ago after Russian troops had seized control of Crimea overwhelmingly backed union with Russia but was denounced by Washington and the European Union as a sham.

The EU emphasized its support for the new pro-Western government in Kiev, signing a political agreement with interim Prime Minister Arseniy Yatseniuk last week.

It also promised financial aid for the government - which Moscow says came to power by a coup to overthrow Yanukovich after he rejected an EU trade deal in favor of closer ties with Russia - as soon as Kiev reaches a deal with the International Monetary Fund. The IMF will report on Tuesday.

A one-stop shopping choice for many retail investors, target-date funds allow an investor to pick a retirement date - say 2030 or so - and the mix of underlying investments is adjusted over time to support that goal.

Their popularity has proved eye-popping since they came into vogue, especially since 2006 when they were approved by Congress as default investment options in 401(k) plans. They house more than $582 billion in total assets as of the end of January, according to mutual fund research firm Lipper, a Thomson Reuters company. That includes a fresh $5.1 billion in inflows over January alone.

"Over the last five years, target-date funds have attracted the majority of assets flowing into equity funds," says Tom Roseen, senior analyst at Lipper. "That is an amazing statement."

The reason for this is that a lot of do-it-yourself investors have thrown in the towel, and just want to have their money professionally managed without worrying over how to allocate for themselves, Roseen says.

COMPLICATED GEARS

Like elegant watches, such funds may look simple from the outside, but their insides contain a complicated matrix of interlocking gears. And that accounts for very different results, depending on which target-date fund you are talking about.

One winner of the 2014 U.S. Lipper Fund Awards: Retirement 2015 from Baltimore-based fund shop T. Rowe Price, for those investors on the cusp of retiring. The fund generated returns of 15.18 percent for 2013, throttling category averages over the one-, three- and five-year periods.

But that was just one of a flurry of winners for the T. Rowe Price fund family. They also secured nods for their retirement funds (offered in five-year increments) all the way through 2050.

Think of target-date managers as the mad scientists of the investing world, throwing many different elements into the cauldron. So what's the secret to getting that mix just right?

"Our funds tend to have higher-than-average equity allocation for folks nearing retirement," says Jerome Clark, a portfolio manager who oversees the firm's target-date products. "In this environment, that allocation has boded very well for investors."

The composition of its 2015 fund at the end of 2013 included 40.3 percent domestic stocks and 18.5 percent foreign equities, a healthy percentage that has benefited from a robust stock market. However, it makes for higher-than-average risk in the event of a potential meltdown.

As with other target-date funds, that mix is continuously tweaked, edging toward more conservative investments such as fixed income and cash the closer one gets to retirement.

That so-called glidepath is the key to the success of another fund family in the space, American Funds from the Los Angeles-based Capital Group Companies. In fact, American Funds also hauled in multiple Lipper Awards this year, for funds with retirement target dates all the way through 2055.

"There are two kinds of glidepaths out there," notes Brad Vogt, Capital Group's senior vice president and portfolio manager who helps oversee the firm's target-date offerings. "For some, the investment mix basically fixes at the retirement date. For ours, that mix evolves all the way through retirement, and that approach has worked well for us."

After all, someone retiring at age 65 likely still has a very long road ahead. Average American lifespans have been heading up for decades and are now at 82.2 years for women and 77.4 years for men. This makes "longevity risk" a critical part of portfolio managers' thinking.

"That retiree needs to keep up with inflation, and rising costs for medicine, for housing, for food and travel," Vogt says. "If they have a highly preservation-oriented portfolio of fixed income or cash, they would lose ground. And if you lose ground over 20 years, you really lose ground."

That explains American Funds' relatively high equity allocation, which has helped returns through the robust bull market, notes Lipper's Roseen. Another factor in recent success is that its managers have so far resisted tossing in alternative investments like Real Estate Investment Trusts (REITs) and commodities.

Many other fund managers in the target-date space have done so, to seek out uncorrelated assets and broader diversification. But those alternative sectors got "clobbered" last year, says Roseen, which benefited American Funds' more streamlined investment mix.

Notably, target-date offerings from T. Rowe Price and American Funds boast expense ratios well below the category average, which has also assisted them in their outperformance. T. Rowe Price's Retirement 2015, for instance, charges an expense ratio of 0.65 percent, which is considered low for a mutual fund.

Of course, not all fund families have been seeing similar success with their target-date fund series. In recent years prominent names like Columbia, Oppenheimer and Goldman Sachs have shuttered their own offerings.

- Energy regulator Ofgem is expected to announce its plans to refer the big six to the new Competition and Markets Authority (CMA); the CMA takes over from the competition commission in Apr and could break apart the big six, resulting in separation of power-generation and retail arms. 

- According to some analysts, the Ofgem referral is likely to make it more difficult for power businesses to raise funds. **Note: The UK big six are: British Gas, EDF Energy, Eon, Npower, Scottish Power and SSE.

Abu Dhabi-based airline Etihad is pushing for a merger of German Air Berlin and Italian Alitalia, ARD reported. Citing three unidentified sources close to the situation, the German TV broadcaster claimed that the merger talks are at an early stage. The report pointed out that Etihad owns a 30% stake in Air Berlin and plans to acquire a stake in Alitalia shortly. Parties that could complicate the merger include the Italian government and the trade unions, ARD concluded.

Air Berlin has a market cap of EUR 240m.

Source ARD

- Under the rules of the Takeover Panel, companies can request for an extension to the deadline if there is a prospect that a deal can be made. 

- The merger would have over 1,200 shops in Britain, meaning it could be investigated by competition authorities. 

--> Visteon's shares, recently in the mid-$80s, could reach $100 within 12 months, as the company's results improve and it buys back stock.

The road ahead looks much smoother for restructured auto supplier Visteon, as a simplified strategy promises to end years of disappointing results.

When Tim Leuliette emerged from the boardroom to lead Visteon in August 2012, the auto supplier had swerved into a ditch. Two years out of bankruptcy, it had run through a chief executive, and its stock was languishing in the $30s, after trading as high as $75 the year before. Hedge funds and "special situation" investors were agitating for management to sell assets or even the whole company to boost the share price.

Soon after Leuliette became CEO, one such investor, anxious to cash out, asked him, "Can you get the stock to $50?" Leuliette's reply: "It's not important that I sell assets to get to $50. I can get you to $50, $60, or $70. There is a strategy here. Give us time."

And Leuliette delivered. Visteon hit $50 by Christmas of that year. In fact, Leuliette, a veteran of the auto-supply business and a Visteondirector since 2010, has driven the stock (ticker: VC) to a recent $86, more than doubling since he took charge; the shares hit a high of $89 in January on improving quarterly results. Leuliette & Co. moved quickly to simplify the company, selling lower-margin operations such as lighting (which fetched $72 million) to focus on climate control and electronics, operations with higher growth opportunities and higher margins.

BEFORE JOINING VISTEON in 2010, Leuliette, now 64, was CEO of DURA Automotive, where he'd run various international operations. Now, he's steering the Van Buren Township, Mich.–based Visteon toward emerging markets, particularly in Asia. Auto production there, estimates LMC Automotive US, will grow 6.5% this year, versus 4.2% globally. In North America, output this year is expected to climb 3%; in Europe, just 1.3%. The Asia region generated 46% of Visteon's $7.4 billion in revenue last year, up from 30% six years ago. North America accounted for 19%, down from 61% before the bankruptcy, with Europe at 30%. Visteon's biggest customer is Hyundai/Kia, which contributes 33% of its revenue. No. 2, at 28%, is Visteon's former parent, Ford Motor (F).

Shares of auto suppliers have been on a roll, their business bolstered by higher auto production in most of the world. Harman International (HAR), for example, is up 150% over the past year. Visteon rose 50%, but bulls think the shares could roll to $100 within 12 months for a gain of almost 20%. The stock is likely to be fueled by steadily improving quarterly profits, plus the sale of Visteon's underperforming interior business.

After a transition period that Leuliette calls "paint-up, clean-up, and fix-up time," Visteon has strong momentum and a $900 million order backlog, which gives management confidence it can hit its goal of $9.7 billion of revenue by 2017. That also should boost investors' confidence that the company will meet or even beat the $155 million, or $3.50 a share, in earnings that Wall Street expects this year, and the $5.33 forecast for 2015. Visteon earned $6.48 a share last year, not including gains on asset sales, on an 8% uptick in revenue. This year, revenue is likely to come in at $8 billion.

IT HAS BEEN A BUMPY ride for Visteon since it was spun out in 2000 by Ford, which had created the company out of its internal-parts operations in 1997. The auto supplier filed for bankruptcy protection in May 2009 after losing more than $600 million the prior year. Sixteen months later, it emerged leaner with $2.1 billion less debt, but then hit the pothole of the global recession. Donald Stebbins, who became CEO in 2008, resigned in 2012 as the stock sputtered.

"Embedded in the company were very good assets that were lost in the noise" of a complex structure, says Leuliette. Along with overseeing the sale of the lighting business, he unloaded the company's 50% stake in China's Yanfeng Visteon Automotive Trim System, for $1.15 billion; consolidated its YFV Electronics into Visteon's electronics segment; and essentially put its interiors business, which generated $1.3 billion in sales last year, on the block. The business has been hurt by lower production volumes in South America.

Not that long ago, "Visteon was an $18 billion conglomerate with seven different product lines," says Chief Financial Officer Jeff Stafeil. "Today, we have gone from a very complex entity to climate and electronics, two businesses with high growth rates and high technology, [benefiting] from tail winds from regulations and consumer preference."

Climate and electronics generate more than 80% of Visteon's revenue. Climate, which includes heating, ventilation, air-conditioning, and power-train cooling systems, last year grew 14%, to $4.9 billion. Visteon is the No. 2 player in the global climate market, with a 13% share, behind Japanese giant Denso (DNZOY).

Visteon scored over $1 billion of contract wins last year, due in part to products like the centrifugal air compressor, which aids fuel efficiency in cars. The climate division boasts 10% profit margins, and management is confident that its sales can expand by 7% annually for the next four years, with the aid of new products.

VISTEON'S ELECTRONICS UNIT makes infotainment and driver-information systems. The business grew 14%, to $1.5 billion last year, has an 8.3% margin, and could expand at a double-digit pace in coming years. Visteon is focusing hard on the fast-growing cockpit-electronics market, where it holds a 10% share, behind Germany's Continental (CTTAY). Visteon and its rivals are trying to produce automotive infotainment and safety-alert systems that essentially turn cars into rolling smartphones, while remaining simple to use and not distracting the driver—a combination that no one has yet been able to offer.

Guggenheim Securities analyst Matthew Stover bases his $100 price target for the shares on the value of Visteon's assets. He views the climate division as worth more than $2.6 billion, or about $54 a share. That valuation takes into account Visteon's 70% stake in Halla Visteon Climate Control (018880.Korea). He pegs the value of Visteon's electronics segment at $27 a share, including the purchase price for JCI Electronics, as well as other items such as net cash and tax shields which he thinks are worth $19 a share.

Visteon looks inexpensive, trading at 6 times earnings before interest, taxes, depreciation, and amortization, while the auto-supplier group fetches 7.1 times. And Stover and other bulls on the stock say the supplier's earnings per share could grow at a 25% clip, over the next four years, outpacing its rivals.

Leuliette evidently agrees that Visteon shares are attractive. He plans to soon use the $875 million remaining in its share-repurchase program to "aggressively" buy back stock. At the end of the fourth quarter, Visteon had $1.7 billion of cash on its balance sheet against $730 million in debt.

If Visteon's prospects pan out, shareholders will be sitting in the driver's seat.

(Reuters) - New French satellite images show possible debris from a missing Malaysian airliner deep in the southern Indian Ocean, Malaysia said on Sunday, adding to growing signs that the plane may have gone down in remote seas off Australia.

The latest lead came as the international search for Malaysia Airlines Flight MH370 entered its third week, with still no confirmed trace of the Boeing 777 that vanished with 239 people on board.

"This morning, Malaysia received new satellite images from the French authorities showing potential objects in the vicinity of the southern corridor," the Malaysian Transport Ministry said in a statement. "Malaysia immediately relayed these images to the Australian rescue co-ordination center."

Australian Prime Minister Tony Abbott said there was "increasing hope" of a breakthrough in the hunt for the plane on the strength of Chinese and Australian satellite images of possible large debris in the southern search area.

The French Foreign Ministry said radar echoes from a satellite put the new debris finding about 2,300 km (1,430 miles) from Perth, without giving a direction or a date.

The debris in the Australian image was about 2,500 km southwest of Perth and the Chinese sighting, captured two days later, was around 120 km (75 miles) "south by west" of that.

"These elements have immediately been passed on to the Malaysian authorities," the ministry said in a statement. "France had decided to mobilize complementary satellite means to continue the search in the identified zone."

Flight MH370 vanished from civilian radar screens early on March 8, less than an hour after taking off from Kuala Lumpur on a scheduled flight to Beijing.

An international force resumed its search efforts on Sunday, zeroing in on two areas around where the sightings were made in an effort to find the object identified by China and other small debris, including a wooden pallet, spotted by a search plane on Saturday.

The Australian rescue co-ordination center sent out eight aircraft - four military and four civilian - to the southern corridor.

"The weather in the southern Indian Ocean is much clearer today than the past couple of days, allowing for the full spectrum of electronic and visual of search capability," Commander William J. Marks, spokesman for the U.S. 7th Fleet, said in an email.

China said the object it had seen on the satellite image was 22 meters long (74ft) and 13 meters (43ft) wide, floating in some of the most inhospitable sea territory on Earth.

It could not easily be determined from the blurred images whether the objects were the same as those detected by Australia, but the Chinese photograph could depict a cluster of smaller objects, said a senior military officer from one of the 26 nations involved in the search for the plane.

The wing of a Boeing 777-200ER is approximately 27 meters long and 14 meters wide at its base, according to estimates derived from publicly available scale drawings. Its fuselage is 63.7 meters long by 6.2 meters wide.

HIJACK OR SABOTAGE?

Investigators believe someone on the flight shut off the plane's communications systems, and partial military radar tracking showed it turning west and re-crossing the Malay Peninsula, apparently under the control of a skilled pilot.

That has led them to focus on hijacking or sabotage, but they have not ruled out technical problems. Faint electronic "pings" detected by a commercial satellite suggested it flew for another six hours or so, but could do no better than place its final signal on one of two vast arcs.

The lack of solid news has meant a prolonged and harrowing wait for families of the passengers, who have complained both in Beijing and Kuala Lumpur about the absence of information, many breaking down with grief. Most of the passengers boarding MH370 were Chinese.

The Malaysian statement said a "high-level" team briefed relatives in Beijing on Sunday in a meeting that lasted more than six hours.

While the southern arc is now the main focus of the search, Malaysia says efforts will continue in both corridors until confirmed debris is found.

"Hopefully we will eventually provide some sort of closure or at least understanding of what happened on board Malaysian Airlines Flight MA370," Australian Deputy Prime Minister Warren Truss said. "The search will continue and will continue as long as there's hope."

A flock of birds shattered the windshields of a Malaysia Airlines jet as it landed in the Nepali capital, Kathmandu, but all 180 passengers and crew were safe, an airport official said on Sunday.

The birds hit the Boeing 737 late on Friday, Ratish Chandra Lal Suman, chief of the Civil Aviation Authority Nepal, said.

Everest Capital's founder explains his fund's index-beating approach to emerging and frontier markets.

Slowing growth in countries like Brazil, China, and India has shifted the spotlight to some less appealing aspects of these once-darling economies. Some investors haven't liked what they've seen, withdrawing $53 billion from emerging-market equity funds since early 2013, according to EPFR Global.

But Marko Dimitrijevic, 54, who runs a hedge fund firm dedicated to global and emerging-market investing, is unfazed. The founder of Everest Capital, which oversees $2 billion in assets from Singapore and Miami, is adept at weathering choppy waters—in volatile emerging markets and as a published photographer of sharks and whales. Dimitrijevic began investing in emerging markets before Russia had a stock market or China was on investors' radars. Having survived 1998's currency devaluations and 2008's financial crisis, he cautions against ignoring emerging markets—or treating them alike.

Swiss-born Dimitrijevic, who is fluent in six languages, chooses his words carefully. The same goes for investments, with Everest marrying a macroeconomic approach with stock-picking. The flagship Everest Global Capital fund returned 41% last year, compared with a 23% gain for the MSCI All Country World Index. Since inception in 1990, it has averaged a 12% return annually, more than four percentage points better than the index.

The fund has about 40% invested in the developed world, slightly less than a year ago, and 30% each in frontier and emerging markets. Barron's spoke with Dimitrijevic by phone in Miami to discuss opportunities in China and India and reasons to invest in smaller emerging and frontier markets.

Barron's: Some strategists are cutting allocations to emerging markets. What do you think?

Dimitrijevic: Taking emerging markets as one concept and making predictions on the group is not going to work anymore. The one-way trade, where most emerging markets did well between 2002 and 2008, was more of an aberration. Many emerging markets have emerged, so differentiation is becoming very important. Last year was a good example, with markets like Taiwan up and others down tremendously. You're going to have to be very selective, but to ignore emerging markets is dangerous.

Why?

The market cap, even though it has underperformed, is larger than that of Japan, the United Kingdom, and Germany combined. While some larger emerging markets are not growing as fast, they are still growing faster than developed markets. If anything, they're just going to become much larger; it's the same, but on steroids, for frontier markets.

Last year's currency declines sparked concerns about a 1998-type crisis. What's changed since then?

Most currencies in emerging markets are now floating, so you didn't have a crisis last year in many of the countries that had significant currency adjustments. With some exceptions, overall indebtedness and import coverage is also much stronger than in 1998. Because of lessons learned from that period, many countries did not use reserves to defend their currencies. Rather, some raised rates and endured an adjustment period. The market is differentiating between India and Indonesia, which have taken such steps, and Brazil and Turkey on the other side.

Brazil's economy has struggled recently. Could coming presidential elections be a turning point?

I'm afraid not. Brazil looks a bit better, but it's not a strong positive endorsement from an economic standpoint. It faces a lot of structural issues like infrastructure and extremely heavy bureaucracy that makes it hard to get things moving. But I can see Brazil muddle through. There are still interesting companies in education and insurance, which are going to be very good sectors. Education, for example, is an area benefiting from government policy rather than getting hurt by it.

Mexico seems like the opposite situation.

It is clearly doing a lot of things right. The government struck an agreement with leading parties to pass various reforms, approving new legislation for education, fiscal, telecom, and energy. [Energy] offers the most potential to increase growth.

Is there a but?

From a stock-picking standpoint, it is more challenging because of the way the [Mexico] index is constructed. Some heavyweights like América Móvil [ticker: AMX] are actually more challenged by reforms than helped by them. But infrastructure is attractive because energy reform will result in stronger demand for cement.

Speaking of reforms, what about China?

People who expect a big implosion soon will be disappointed, and those who expect terrific reforms soon will be disappointed. I don't expect things to be like before, but they will do it the Chinese way: Cross the river a rock at a time.

What does that mean for the market?

There probably won't be a lot of volatility in the real economy, but there will be continuous volatility in financial markets as people try to read the tea leaves. You have to be very selective.

What looks good?

Chinese Internet and defense-related stocks are going to do very well. The Internet is very disruptive to China. The growth of Internet retailing is going to confound people, and some bricks-and-mortar companies may suffer in China faster than in the West. The central budget for defense will rise about 12% this year and is expected to grow 10% annually for the next five years. We've seen anxiety over the Japanese/Chinese relationship increase recently, which will result in stronger investment in the sector.

India's economy has been in a rut. What do you like?

India has world-class companies, like Tata Motors [TTM]. What they have done with Range Rover and Jaguar is amazing. The new Range Rover has a nine-month wait list in some markets, and Jaguar is coming up with a new lineup. But it's really more an opportunity outside India. The India domestic story is more challenging.

Why should investors consider frontier markets?

A lot of people focus on what China does, what it means for the world economy, and if it is slowing or not. Today, the gross domestic product of frontier markets is bigger than China, and many of these countries are growing as fast or faster. Yet, the market cap of frontier markets is small—about $2.5 trillion. It's not insignificant and still bigger than Germany. A chief investment officer would get fired if he said my mandate is all over the world but not in Germany.

Frontier markets are up 9% this year, on top of a 21% gain in 2013. Is there more upside?

Frontier markets are just at the beginning of a rerating phase,and the opportunity is quite different than in larger emerging markets. Frontier markets are much closer to mainstream emerging markets 15 years ago. In some of those markets, you can do quite well from a macro approach because you're in a much earlier stage of development. In some companies, you'll have five, seven, maybe 10 years of superior growth.

But isn't liquidity an issue?

Yes. If you're investing in frontier markets and want daily liquidity through an exchange-traded fund, you shouldn't invest in frontier markets. We match the liquidity of our investments with that of the underlying vehicle. Any fund with less than a month of liquidity is going to be trouble one day.

Africa has gotten a lot of attention lately. What has that done to valuations?

It's clearly a theme that caught on with retail-oriented funds and that pushed valuations into unattractive territory for some of the more obvious consumer franchises, whether food or breweries. We took advantage of that to reduce our exposure to some of those and redeployed it in other sectors. Banking is another way to capture the increase in consumption. As you get richer, you start using more banking services, and you can get these stocks for much cheaper valuations than some of the more obvious consumer stocks. We own some banks in Nigeria and Rwanda, some breweries like Bralirwa [BLR. Rwanda], and have investments in oil and gas.

What else is attractive?

We think Saudi Arabia is the largest opportunity within emerging markets.

Aren't there foreign-holding restrictions?

Yes. But for those like us who can get it, it is a vibrant economy. The market is close to $500 billion in market cap, larger than Mexico or South Africa, but it falls in the no-man's world of indexes—neither in frontier or emerging-markets indexes. It has a young population earning good income. Anything consumer-related is going to have a tail wind for several years to come. We own Alhokair [ALHOKAIR.Saudi Arabia], one of the biggest apparel retailers in the midprice fashion category. Saudi remains one of the most underpenetrated apparel markets. Sales per capita are about $350, which is 25% below the emerging-markets average even though GDP/capita is quite high at $25,000. There is a growing focus on shopping as a form of entertainment, and Alhokair, which offers about 80 brands including Zara, has prime locations.

Why should investors look beyond the usual emerging markets?

It's just a bigger sandbox. If you limit yourself to indexing, you have a big swath of Chinese banks and state-controlled energy companies across the emerging-markets world. It's not necessarily where the next opportunity is going to be. If you limit yourself to the frontier market index, Kuwait has a 30% weight. [Kuwait] is 5% of our frontier-markets universe, so it's completely lopsided in the index.

You have to broaden your horizon because the index is not a representation of reality. There are over 1,000 liquid companies in our universe and great themes and companies, but you won't capture that by buying and holding an ETF.

How do you feel about the U.S.?

The base case is moderate growth. Real unemployment will decline, but structural issues will make it difficult to come down substantially. As a result, the Fed will keep its low-rate policy, so the economy will be neither too hot or too cold. Markets will move in lock step with earnings, so probably high single digits, maybe low double-digit returns.

What do you like in the U.S.?

Solar, including companies like SunEdison [SUNE]. The cost of solar modules, the biggest single component in a solar-power project's cost, has fallen about 85% in the past five years. The all-in cost of these projects has declined over the past decade to a point where in many areas, even globally, newer solar projects offer an equivalent cost of electricity that is as good or better than prevailing grid rates, even without incentives. Countries like China and India are committing more resources toward clean sources of energy to combat pollution, with solar a key beneficiary.

We also own XPO Logistics [XPO], a freight-logistics and brokerage-services firm. It is consolidating the U.S. freight-brokerage market, which has about 10,000 players. About 90% of them are small and lack the capital to scale, which typically makes them willing sellers. XPO's management has extensive experience and a successful track record with prior consolidation.

Cover story: Barrons 10th annual list of the Worlds Best CEOs; New to the list are Richard Anderson of DAL, Mark Donegan of PCP, Reed Hastings of NFLX, John Martin of GILD, Leonard Schleifer of REGN, Masayoshi Son of Softbank, Jeffrey Sprecher of ICE, and Mark Zuckerberg of FB. 

Features: 

1) Positive on AAPL: A new iPhone with a larger screen to better compete against offerings from Samsung could boost Apples second-half earnings by 10-15% and give users a new reason to upgrade, lifting shares by 20% or more, while a buyback could also be in the works; 

2) Cautious on PFG: Current share price doesnt reflect companys attractive long-term position as a global money manager, and if multiple were accorded it following that viewpoint, shares would be worth 25% more; 3) Positive on VC: Shares, now in the mid-$80s and cheaper than rivals such as HAR, JCI, and DLPH, could reach $100 in the next 12 months as results improve and company buys back stock. 

Tech Trader: Positive on MSFT: Companys decision to offer Office for the AAPL iPad was a good one, but despite the fact Office is a cash cow, cloud computing is the key to the companys future; that market is in an early, evolutionary phase and will eventually coalesce around a few top vendors, presenting an opportunity for Microsoft. 

Trader: Positive on TGT: In a market where few stocks of strong, reliable, dividend-paying firms are cheap, Target looks attractive despite recent hit to its reputation from data breach; Positive on TWTR: New report from Markit finds that some tweets provide the basis of important, short-term sentiment indicators, and when properly collected, scrubbed, and analyzed, can help build a trading portfolio that beats the market; Cautious on CWH: If shareholder vote to replace entire board holds up, shares could eventually reach $30 from current $22. 

Small Caps: Positive on MDR: At current prices, shares already reflect concerns about execution problems and cost overruns due to expansion of fleet capabilities, and they could be poised for gains over the next 18 months. 

Mutual Funds: Interview with David Rolfe, Portfolio Manager, RiverPark/Wedgewood Retail Fund (top ten holdings: BRK.B, AAPL, ESRX, QCOM, CTSH, EMC, MTB, CMI, SRCL, PRGO); Interview with Marko Dimitrijevic, Founder, Everest Capital (top picks: XPO, SUNE, TTM, Brasseries et Limonaderies du Rwanda, Fawaz Abdulaziz Alhokair).