This Emerging Markets Bet Is One of the Best Contrarian Investments of 2014

When it comes to emerging markets, risk takers can capture the most profits when exposed equities are down.

Buying opportunities emerge from a panic sell-off, leaving contrarian-minded investors the opportunity to pick up money that is just sitting in the corner. They zig while others zag, and they're willing to wait out the profits from deep-value picks.

Last Saturday, a panel of experts at an investment conference discussed their views on the markets for 2014. One of the six questions asked was: "Which equity, market, or commodity is currently undervalued and a great pick for the months ahead?"

An investment director at a top equity firm took the microphone. His answer elicited gasps from some audience members when he suggested the audience invest in America's "number one political foe."

But his contrarian pick was dead on in terms of profit potential. On top of that, it turns out he's in good company – just two days later, an investment legend said he already jumped into this emerging market to capture value as well…

Top Emerging Markets: From Russia… With Love

In the 2012 presidential election, Republican candidate Mitt Romney evoked Cold War rhetoric, describing Russia as our nation's "number one political foe."

Whether Romney spoke a truth or a gaffe is irrelevant – we're looking for a way to profit from geopolitical uncertainty and from value.

Russia's invasion of the Crimea region of Ukraine set off a geopolitical firestorm that led to problems for the Russian emerging market – a notable member of the BRIC countries (Brazil, India, and China comprise the rest). Russia's stock market tanked, thanks in part to swift outflows of capital and growing concerns about the impact of sanctions on some of its most notable businessmen and allies of Russian President Vladimir Putin.

The sanctions came at a time when the International Monetary Fund (IMF) warned that the Russian economy could slip into recession due to its structural problems.

Infrastructure-dependent oil and gas revenues account for more than half of the government's revenue, and the nation hasn't been able to boost spending on infrastructure or increase wages due to its flawed structural model. In addition, to stabilize its currency against capital flight in the wake of Crimea, Russia hoisted interest rates and drew on its reserves.

As a result, the country's economy is expected to stagnate at a paltry 1.3% growth rate in 2014, just a slight increase over last year's 1.1%, according to the IMF.

And the Market Vector Russia ETF Trust (NYSE Arca: RSX), the largest U.S. exchange-traded fund that holds Russian shares, is down 18.76% year to date.

With Russian stocks bruised and battered, value investors are looking to profit.

Jim Rogers, chairman of Rogers Holdings, told the Moscow Times on Monday that he's looking for opportunities. "Russia's stock market right now is one of the cheapest in the world, and probably one of the most hated," he said. "This is the time to buy Russia."

And there's plenty of value to go around.

Here's how to capture gains from this promising emerging markets pick…

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