(FORTUNE Magazine) – Have you ever heard of Village Roadshow, an Australian movie theater operator, which more than doubled its earnings last year? Or IHC Caland of Rotterdam, the global dredging leader, which averages annual earnings growth of 20% yet sells for a measly nine times earnings? Michael Gerding, who manages the Founders Passport Fund, has, and it was shrewd picks like these that propelled his international small-cap fund to a 1995 return of more than 24%.

Before you compare that with the better than 38% returned by the S&P 500 and scoff, note that the Big Money believes the hot action in 1996 lies overseas among small, fast-growing companies in forgotten markets such as Europe and Japan. Those who set up early foreign beachheads include John Boich, manager of the Montgomery International Small Cap Fund. Even though Lipper Analytical Services tracks only 12 such funds, the field is getting relatively crowded. Says Boich: "We are not only seeing a rise of competitor funds, but we see institutional investor interest rising as well."

Gerding, Boich, and their peers flout the standard international index weightings--often with mixed results (see table). Instead they cherry-pick companies they think are poised to hop aboard a hot trend or supply a much-needed product. Says Ralph Wanger, co-manager of the Acorn International Fund: "In some countries, people are seeing their first net surfer and supermarket at the same time. Small companies with entrepreneurial spirit and the ability to get in line with a fast trend will benefit the most." His buys include TT Tieto, a Finnish computer services outsourcing company, and Hokuto, Japan's largest mushroom grower. Gerding goes for more familiar faces, like the Dutch brewer Grolsch and Hong Kong's VTech, maker of the popular VTech PCs for kids. Boich favors European financial services outfits like Anglo Irish Bank.

Sure, buying these international funds while the dollar is weak means the managers get less bang for your buck. But you're also catching the same rising wave as the pros.

--Andrea L. Prochniak