Africa and the Middle East are unlikely to strike most people as bastions of opportunity. But that's how portfolio manager Oliver Bell views the region.

Bell, manager of T. Rowe Price's Africa and Middle East mutual fund, notes that over the last 10 years the region has undergone a dramatic transformation as countries emerged from civil wars and toppled dictators.

By the end of this year, half of Africa's 54 countries will have had a democratic election within the past 24 months. And that parlays into economic growth, Bell says, noting the strong link that exists between "greater personal freedom and high levels of GDP per capita." That, combined with the broad structural changes across the region, have created enormous opportunities for investors.

"You can find a number of companies that will deliver at least 20% earnings growth for the foreseeable future," he says. "At this stage, they're not valued correctly given the opportunities these companies have got and given the structural changes and the tailwinds they're going to have for a number of years as a lot of these countries reform."

Indeed, all the economic indicators point to a healthy region. GDP growth for Africa and the Middle East has averaged 5.5% over the last decade, lagging Asia but beating the rest of the world. It's the first decade in a long time that the region has seen strong productivity growth, Bell says.

Notably, the region beat back inflation, which fell to 6% in 2011, down from 26% in the 1970s. A huge debt-relief program in Africa has helped bring down debt-to-GDP ratios to manageable levels, dropping to 20%, "so that every dollar earned is no longer paying for debt," Bell notes. Most tellingly, foreign investment is pouring into the region, with China contributing $100 billion from 2005 to 2010, one-third of its entire foreign direct investment during that period.

Still, despite those positive trends, geopolitical issues marked by uprisings and violence persist in places like Libya and Syria, among others. But Bell says that those trouble spots aren't hampering investment opportunities elsewhere. "The countries we're investing in are not the ones we're hearing about on television," says Bell, a British citizen who joined T. Rowe Price and began managing the fund in October of 2011.

Saudi Arabia, South Africa and Nigeria lead Bell's list of favored countries, accounting for roughly 74% of the holdings in the fund, which as of July 31, 2012, had $146.7 million in assets.

After the Arab Spring, Saudi Arabia has been spending aggressively internally, including $700 billion on infrastructure projects across the kingdom, Bell says. In addition, the Saudi government granted civil servants pay raises and two months extra salary, and introduced monthly unemployment benefits, among other initiatives to placate the public.

"They're buying their way into staying in power, but as an investor you can benefit from this," says Bell.

Saudi banks, in particular, are an especially good investment opportunity as financing is step one in any infrastructure project. The fund's top holding is Al Rajhi Bank, the world's largest Islamic bank. The privately owned Saudi bank has some of the highest returns on equity. "This is the best-placed bank to get exposure to the retail credit environment in Saudi Arabia," Bell says.

The fund also invests heavily in Saudi Arabian consumer goods companies. For example, it has a stake in United Electronics, the first Saudi big-box retailer.

South African companies, particularly food retailers, also get top billing, accounting for 38.1% of the fund's holdings. "With one billion people at the doorstep," these companies are growing rapidly and expanding into the rest of the continent, says Bell.

ShopRite Holdings, a food retailer with 700 stores in South Africa and 135 in the rest of Africa, is among the fund's 10 largest holdings (as of Aug. 31, 2012).

Nigerian banks are also a popular choice. The country's "banking system got completely cleaned up," resulting in a great deal of pent-up demand for banking services, according to Bell. Moreover, Nigerian banking stocks are very cheap.

The picks appear to have served the fund well, which ranked No. 2 on Morningstar's list of the best-performing emerging-markets mutual funds. Year-to-date the fund is up about 13%, according to Morningstar. Over the last 12 months, it is up 11.0%. The annualized three-year return is up 4.8%.

Selecting the stocks is a team effort, Bell says. He and his team seek companies that they can invest in for the long term. "We're looking for companies that you would call high quality with very good management consistently delivering results and giving you exposure to sectors or countries that are growing very fast," says Bell, who also manages the T. Rowe Price Institutional Africa and Middle East fund. That fund, which posted gains of 11.6% over the past 12 months, topped Morningstar's list of emerging-markets funds over that time period.

His team consists of five analysts who use fundamental research to make their stock picks. They cover the region on a sector basis, "scouring the universe to find companies managing their businesses through the cycles," says Bell. In addition, an economist weighs in with macroeconomic analysis of the country in which the selected companies are located. If a country they're considering raises any type of red flag, such as high inflation, for example, they won't invest in it. "If we find a country that we like, we don't necessarily buy it unless we're absolutely happy that macro is also in place," says Bell.

So what about those troubled countries like Libya? They don't dampen Bell's excitement about the opportunities in the rapidly changing region. Though they have to be watched, they have little, if any, impact on the growth prospects of the region overall, Bell insists.

Bell points out that Africa and the Middle East was the best-performing emerging-market region in three of the last four calendar years. "This is a vast region and a crisis in Libya has no impact really on South Africa. It has no impact on Saudi Arabia."

Still, news of unrest anywhere is hard to shake. "The biggest challenge is to work out how much of this noise we see and hear on the tele is relevant," Bell says. "The challenge is to avoid those markets or those companies that will go through bouts of turmoil." Even more of a challenge for Bell: bridging the gap between the trouble spots and the opportunities. "I think part of my battle is convincing people that what we see on the tele is a microcosm of reality and that the investment opportunity is huge," he says.