Three Solid--and Open--Foreign Small/Mid-Cap Funds

With international funds again drawing the interest of investors, many of the most popular have been deluged with assets. That's forced many funds to shutter their doors as liquidity in this part of the market is crucial. But what are investors to do if they still want to put money to work in the asset class?

While there aren't many remaining compelling choices, I'm using today's column to highlight three that remain open in the small- to mid-cap space. My colleague Bill Rocco will follow up with some large-cap ideas tomorrow. (Be warned, though, foreign funds--particularly those focusing on small- and mid-cap stocks, have already had a strong run, so returns are likely to slow. In fact, if you're buying one of these funds simply because they've done well--and not because they should be part of a diversified portfolio--you're probably going to be disappointed.)

 Third Avenue International Value  
If you like cheapskates, manager Amit Wadhwaney certainly fits that profile. He looks for companies that are trading at big discounts to their private or liquidation values, scrutinizing each firm's balance sheet to get a fix on the sum of its parts. Although Wadhwaney has targeted smaller-cap stocks, he views the fund as an all-cap offering and is willing to venture into larger fare. He pays no heed to benchmarks, and I also like the fact that the fund will hold cash when Wadhwaney can't find much to buy. In fact, the fund is currently awash in cash, which may help if the asset class cools. Of course, the reverse is true if stocks continue to climb.

 T. Rowe Price International Discovery  (PRIDX)
Manager Justin Thomson focuses on firms with market caps between $250 million and $3 billion that enjoy rapid earnings growth, robust sales growth, and strong returns on equity. While we were a little surprised by how much this fund lost in the last bear market, it has subsequently toned things down. That means it's likely to be more predictable than it's been in the past, although shareholders should expect anything but an index hugger. Finally, we think this fund will benefit from T. Rowe's efforts to shore up its international research.

 Neuberger Berman International  
This fund uses an all-cap approach. Its manager favors steadily growing firms, based on both revenue and earnings growth, but is equally concerned about the quality of company management and valuations. The fund is fairly diverse, with generally small position sizes. In fact, one of the key reasons we like this fund is because of its measured pace in what can otherwise be a crazy area of the market.