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COMING UP TRUMPS IN THE SLUMP

This money manager went shopping for stocks--in the depths of the market's mid-July slide--and came out a winner. From July 16 through July 24--when the market was badly battered--the portfolio of Catherine Lawson, chairman and chief investment officer of Highland Investment Group, gained 0.10%, vs. a loss of 0.32% for the Standard & Poor's 500-stock index. Highland also did well in the longer term: From Sept. 30, 1995, through July 24, 1996, its stocks gained 6.4%, compared with the S&P's 0.47%.

Lawson is high mainly on small-caps. One of her latest favorites is PETsMART (PETM), which operates nearly 300 pet superstores, specializing in food, supplies, and services. Another is Express Scripts (ESRX), a provider of pharmacy-management services--including mail-order medicine--designed to contain costs of prescription drugs.

PETsMART has been on a quite a roll this year: Its stock has nearly doubled, from 12 5/8 a share in mid-January to 22 7/8 by July 30. Lawson figures it will hit 30 before yearend. She expects PETsMART's expansion will continue, adding about 60 stores this year. She also looks for profit growth: 85 cents a share in the year ending Jan. 30, 1997, and $1.22 in fiscal 1998. ``Demand for these one-stop pet superstores is growing by leaps and bounds,'' says Lawson, who notes that PETsMART's slice of the $32 billion pet business is still only 4%. She sees it doubling in a couple of years.

Express Scripts, trading at 35, is down from 58 in mid-January. But Lawson sees it snapping back to the upper 50s. The business is capital-intensive, notes Lawson, but there's substantial growth ahead. And with its stock way down, Express Scripts is ``bound to be taken over,'' says Lawson. It is, she adds, ``the last remaining independent mail-order drug stock.''

BY GENE G. MARCIAL


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Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.
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