The Baltic region which includes Scandinavia and the tiny countries of Latvia, Lithuania and Estonia — is an often overlooked part of the world, but one that provides interesting investment opportunities for your clients.

Many of the companies based in this region that are recommended by analysts are global in scope. These include industrial companies, a pharmaceuticals firm, a telecommunications company and a couple of banks.

On a country-specific basis, Finland-based companies provide a gateway to Russia without the concerns about the lack of corporate governance and the risk of expropriation that characterizes Russian firms. Says Martin Fahey, head of European equities with I.G. Investment Management Ltd. in Dublin: “The Finns tend to be very conservative, and I tend to trust companies based in Finland.”

Sweden is the most exposed to Latvia, Lithuania and Estonia, mainly through its banks, which financed the run-up in property values in those three countries before the recent global financial crisis. Swedish bank stocks were severely punished when the crisis hit and borrowers had trouble repaying their loans. Although these stocks have since recovered, there could be more appreciation. And there may also be opportunities in Sweden’s global industrial firms.

Norway is a classic resources country; its fortunes tend to rise and fall with the price of oil — and most investment opportunities in Norway relate to that sector.

Denmark has a couple of big, strong pharmaceutical firms and some good consumer stocks.

Scandinavia was relatively unscathed by the crisis and ensuing recession. Much like Canada, Scandinavian countries went through great pain in the 1990s to get their finances in order and, as a result, were in good fiscal shape. Their banking systems, with the exception of Sweden’s, are conservative. Only Denmark — specifically, its capital, Copenhagen — had a property price boom before the crisis, and it wasn’t huge.

Latvia, Lithuania and Estonia are too small to be on many investors’ radar screens, and not many firms in these countries trade on other stock exchanges. All three countries were severely affected by the recession, says Gyorgy Kovacs, a macroeconomist responsible for eastern Europe with Zurich-based UBS AG in London. The three Baltic nations had real estate bubbles that were exacerbated because they were financed by hard-currency loans issued by foreign banks. When the global financial crisis hit, wages were cut to improve competitiveness, making it difficult for households to repay their mortgages — especially as taxes rose and government expenditures were slashed.

Latvia needed an Inter-national Monetary Fund/Euro-pean Union rescue package, but the other two managed to get through on their own. All three economies are now growing again.

Here’s a look at some companies based in the Baltic region that are recommended by analysts:@page_break@> Atlas Copco AB is a Sweden-based global industrial firm that develops and manufactures industrial tools, air compressors, and construction and mining equipment. A report by JPMorgan Chase & Co. recommends “overweighting” Atlas, pointing to its management’s solid track record on execution and its strong emerging-market exposure. A report from UBS rates the stock as “neutral,” given its current valuation.

> Novo Nordisk A/S. A JPMorgan report recommends “overweighting” this Denmark-based pharmaceuticals firm, as analysts expect it to reach a 35% operating margin by 2013 rather than the consensus of 2015. The report suggests buying on share-price weakness caused by a weaker than expected fourth quarter in 2010 and an overreaction in February to a Massachusetts court subpoena related to “potential criminal offences connected with the marketing and promotion” of three products. A UBS report is less enthusiastic, rating the stock as “neutral.”

> Outotec OYJ is a global Finland-based mining-technology firm that should continue to do well, says Fahey, as long as commodities prices remain high.

JPMorgan’s analysts like Outo-tec’s plans to build common global operational systems and service platforms by 2015 and believe that the stock deserves to trade at a premium. The firm is also broadening its research and development into water treatment and energy, and is increasing development of mineral products.

> SEB. Reports from JPMorgan and UBS have “overweight” and “buy” ratings, respectively, on this Swedish bank — which is the most exposed to Latvia, Lithuania and Estonia — based on the quality of its assets and economic recovery in those countries. The UBS report says the turnaround in Nordic corporate activity is gathering pace.

> Swedbank AB. This Sweden-based bank is the top pick among Nordic banks in a report by JPMorgan analysts, who think Swedbank has a 30% total return potential this year, based on increased earnings, dividends and a buyback of at least 5% of its shares. A UBS report rates the shares as “neutral,” noting they are close to being fairly valued despite an expected 7% share buyback.

> Telenor Group ASA is a Norway-based telecom firm with extensive operations in Scandinavia, eastern Europe and Asia. A UBS report has a “buy” rating on the stock, saying Telenor is well positioned to benefit from a strong domestic market and demand from higher-income Asian emerging markets. A JPMorgan report recommends “overweighting” its stock, but Fahey believes the shares are fairly valued and he would buy only on weakness.

> Volvo AB. After selling its automobile division to Ford Motor Co. in 1999, 70% of this global Sweden-based firm’s production is trucks. Volvo also makes construction equipment, buses, marine engines and aerospace components. A UBS report has a “buy” rating on the stock, saying Volvo has more emerging-markets exposure — about 70% of its 2010 profits — than most investors realize and deserves to trade at a higher multiple. A JPMorgan report recommends “overweighting” the stock. IE