They are the areas that have fallen from favour; the countries, regions and sectors ravaged by economic and political problems over the last few years. However, they are also the places that could provide the key to bumper returns for contrarian investors.
While many of them will certainly not be for the faint-hearted because they remain vulnerable to shocks and uncertainty, individuals brave enough to take a chance could enjoy decent rewards, according to Jason Hollands, a managing director at Bestinvest.
"The essence of successful investing is to buy low and sell high, yet many private investors do the opposite and chase recent performance," he says. "It takes nerves to back a market or asset class when it is deeply out of favour, but the results can be rewarding."
Investors who kept faith with Europe have already experienced this phenomenon in the last few years, points out Jason Witcombe, director of Evolve Financial Planning, who suggests it might be an idea to work on the basis of "reversion to mean" when it comes to making such decisions.
"European equities fell more than most other developed market equities in 2009-11 on the back of political and economic uncertainties, but have since bounced more than most," he says. "Those people who held their nerve and increased their European equity weightings to bring their allocation back to their original target, will have done very well."
So where do the most attractive opportunities exist? We quizzed a number of financial advisers, company analysts, investment officers and fund managers to highlight which countries, regions, sectors and stocks were worthy of consideration by contrarian investors.
The first stop on our international tour of troubled areas is India. Although racked with poverty and overwhelming bureaucracy, it is set to be the world's largest nation by population, and that brings significant opportunities, according to Brian Dennehy, managing director of fundexpert.co.uk.
"It is a very young nation compared to China, Europe and the US, and this creates huge potential dynamism," he says. "The potential will only be realised through many years of reform. As India is 10 years behind China, it won't happen quickly but there are signs of long-term commitment."
Patrick Connolly at AWD Chase de Vere believes India is likely to perform well over the long term, and warrants a place in client portfolios, but points out that infrastructure deficiencies, inadequate economic reforms and political issues remain problematic.
"Because of the high risks, we don't recommend that clients buy funds investing specifically in India but rather get exposure through broad-based emerging markets funds such as JPM Emerging Markets, which currently has 12 per cent invested in India," he says.
Next is Japan. Investors have been waiting patiently for the land of the rising sun to "turn the corner" for more years than they care to remember, but there has been a surge of optimism over the last few months thanks to a strong stock market rally.
That apparent uptick in fortunes has been prompted by a faltering yen and the Bank of Japan's massive stimulus package, the scale of which has stunned investors, according to Mark Burgess, Threadneedle's chief investment officer.
"The intention of the BoJ is to end 20 years of deflation and get inflation up to 2 per cent [a year] by forcing investors out of bonds and into riskier assets," he says. "Faced with a decline in the domestic population of 30 per cent, I suspect the reflationary policies will ultimately fail, but at least the authorities are giving it their best shot."
It's risky, but Japan will offer potential for investors until it goes wrong, suggests Brian Dennehy. "Until that final cut, the yen will fall sharply, which should push their market higher," he says. "Their market is cheap, but usually things are cheap for a reason – so you can have a punt, but take care."
On the face of it, things look bleak for Russia, concedes Patrick Connolly at AWD Chase de Vere, with its stock market trading at a 50 per cent discount to some of its emerging market peers and economic growth forecasts cut, meaning there is a risk it could move into recession later in the year.
However, the economy has undergone a significant transformation over the last decade. "It has virtually no sovereign debt, large foreign exchange reserves, low inflation rates and an increasing dispersion of wealth," he says. "It also remains one of the world's largest commodity producers."
Russia's economic rise was born out of its enormous natural resources, and Mr Connolly believes demand is set to remain as other fast-growing economies, most notably China, continue to need what Russia produces.
"Financial market reform is opening up in Russia to greater foreign and domestic investment," he adds. "Reforms are being introduced to allow domestic pension funds access to the equity market, while constraints on foreign investors are being lifted. This should support Russian equities."
Since 2008 investors have viewed Europe as being in a long-running crisis, but now might be the time for a re-think, according to Andy Gadd, head of research at Lighthouse Group. "Many investors have responded by pulling their money out of European stock and bond markets, or simply not investing new money," he says. "Nevertheless there are some very attractively priced investments in Europe at the current time, and the fact is that Europe boasts a host of globally renowned companies that are performing well, making profits and have significant levels of cash on their balance sheets."
However, the underlying problems in Europe are yet to be resolved, so there could be more painful times to come. "Eur-ope therefore remains a higher risk investment, and investors should be cautious, as any unexpected shocks or setbacks, or any country leaving the euro, could be very detrimental across the board in the short term," he adds.
Geoff Penrice, a charted financial planner at Astute Financial Management, believes that many under-developed countries have enormous potential in terms of natural resources and young populations, and says that these can provide tempting opportunities for investors. In particular, he cites Nigeria, Egypt, Saudi Arabia, United Arab Emirates, Ukraine, Kazakhstan and Vietnam.
"Nigeria not only has oil but also a thriving banking, cement and telecoms sector, while Egypt has started to recover since the revolution and has given some fantastic returns," he says. "The easiest way to access some of these investment opportunities is to consider some of the frontier funds, such as Templeton Frontier Markets, BlackRock Frontiers, and Schroder ISF Frontier Markets Equity."
Stocks and sectors
Nick Kirrage, co-manager of the Schroder Recovery fund, suggests the pharmaceuticals sector is also worth a look, as it feels like the tobacco sector did 15 years ago. In particular, he suggests AstraZeneca could do well as expectations are currently so low.
"It's an area that is unloved and undervalued with everyone feeling very glass-half-empty and worried about pricing power," he says. "However, they ignore the high barriers to entry, the strong cash flows, and the fact that you will ultimately pay a very low price." It's also worth looking at sectors whose fortunes are tied in with the prospects for different regions, points out Julian Chillingworth, chief investment officer at Rathbones. If the lack of enthusiasm towards China continues, for example, this could throw up opportunities in a number of areas.
"If we have further setbacks, it could be interesting to look at some of the mining companies, because we think the market might get over-bearish on them," he says. "It's a way of playing by developed markets a pick-up in growth in China which will obviously help the rest of the emerging markets."
Helal Miah, investment research manager at The Share Centre, agrees. He points out that recent commodity price falls have had a negative impact on the mining sector, but argues that it offers investors strong opportunities over the longer term, particularly BHP Billiton and Randgold Resources.
"We recommend BHP Billiton as we believe that in the longer term the company remains in a strong position to grow its profits as sentiment becomes more positive," he says. "We would suggest investors seeking growth opportunities drip feed into the stock on any weakness in the share price."
Randgold's share price will always be linked to a certain extent to the underlying price of gold, although over the past year it has also been influenced by stock-specific issues such as production and its exposure to Mali, which has been going through political turmoil.
Although confidence in Mali and the stock has taken a tumble, the actual operations of Randgold have remained largely unaffected, with record production and profit levels during 2012. However, it would be foolish to rule out the possibility of further turmoil affecting the company.
"We therefore consider this as a high-risk investment and recommend the stock for investors considering exposure to gold and a company that is expanding its resource base, operations and production," he adds.