Rapid economic growth, whether in a country or a sector, is the holy grail of investing. When you have that, valuations that initially appear expensive become cheap and stock prices grow, sometimes strongly, for years. By and large, rapidly growing companies in a slowly growing environment either slow their growth sharply or become overleveraged before going bankrupt or drastically diluting their shareholders in the next downturn.

Second, I look at what I consider the “secret sauce” of investing in emerging markets: the balance of payments, which is a record of the country’s international transactions that generate flows of funds. Many countries grow rapidly for a number of years by sucking in foreign investment and speculative bubbles before running aground when that investment ceases or slows.

Especially if the country has borrowed heavily, it suffers a balance-of-payments crisis, in which the currency and the stock markets’ value crumbles. Companies that borrowed heavily in foreign currencies are then forced into bankruptcy or must take other emergency measures that destroy shareholder value.

The Pacific region ran into this problem in 1997, when investors in Thailand and Indonesia lost most or all of their money. There wasn’t much wrong with those economies, or even with their economic governance, and if the crisis could have been avoided, their investors would have done fine.

Since 1997 East Asian countries in particular have been more careful about borrowing from abroad, in contrast to India, most of Africa and much of Latin America. Consequently, the balances of payments for East Asian countries are in decent shape.

I am especially impressed with the record of the Philippines, which currently has 6% growth and a substantial balance-of-payments surplus. It’s an investment choice almost unknown in this country, and I have overweighted it suitably in our portfolio.

Finally, I am conservative about governance, which takes two forms: the country’s government itself, particularly its regard for property rights (especially those of U.S. individual investors) and the management of the companies within the country.

Because of this, I like companies trading in Singapore, which has a well-run economy and a free market, and ranks among the world’s least corrupt countries.

Conversely, I am wary of China, despite its excellent growth rate. I am even more cautious about Russia. Don’t expect to see Russian companies in our portfolios until the country changes radically.

Within a country, I choose stocks that offer the best value and not necessarily those with the lowest P/E ratios. Many such companies, like those in the oil industry, have fallen on hard times and won’t be able to repeat their 2014 earnings in 2015.

What’s more, growth offers value, too. If a company is in a sector that is growing more rapidly than the overall economy, it deserves to trade at a premium. But I am skeptical of hot stocks that dominate the headlines. If a stock is well known and trades at a high P/E ratio, it generally has been bid up to an excessive price. That’s especially true in markets like the one we have now, when interest rates are low and too much money is chasing too few opportunities.

Because this publication concentrates solely on Pacific Rim countries, we will invest to some extent in the Latin American members of the Pacific Alliance (Chile, Colombia, Peru and Mexico). Through trade treaties and other means, these countries are attempting to increase their trans-Pacific business and generally have freer markets than other Latin American nations.

In East Asia, Japan’s weak economy will keep us underweight there. The same is true of China, where governance and accounting worries, particularly among smaller companies, raise concerns. But we will certainly be open to all other countries in the region that meet our standards for governance, growth and balance of payments. Naturally, that also includes Australia, whose future lies fully in the Pacific region.