(MONEY Magazine) – EXCITING STOCK INVESTMENT opportunities beckon from all over the world. Latin American phone companies. South African gold mines. Chinese cementmakers. Where should you put your money? One truly surprising answer: in the stocks of fast-growing companies in your own region of the U.S. "Investors have access to firsthand information about companies in their area," explains Thomas Taylor, president of Chesapeake Securities in Baltimore. "Being close to a company's customers, employees and products means you don't have to rely on prepackaged Wall Street research. That gives you an edge." Indeed, backyard investing has become so popular -- and profitable -- that there are now 18 widely available mutual funds (twice as many as in 1990) that invest almost exclusively in the stocks of companies in a single state or region. According to Morningstar, the fund tracking service in Chicago, the two top-performing regional funds over the three years that ended Sept. 1 were $32 million Victory Ohio Regional Stock (4.75% load; three-year annualized return, 15.2%; 800-539-3863) and $79 million Paragon Gulf South Growth (4.5% load; up 14.8%; 800-777-5143). Well aware of the advantages of investing close to home, the National Association of Investors Corporation in Madison Heights, Mich. recommends that its roughly 13,000 member clubs around the country put at least 25% of their portfolios in companies based in their states or regions. "We tell our members to keep an eye on which companies are opening new plants and which ones just hired their neighbors," says Barry Murphy, the NAIC marketing director. "These simple, fundamental observations can often point to a company on the move." Historically, the NAIC's clubs as a group have outperformed the S&P 500 an average of seven out of 10 years by as much as three percentage points. Another bonus for backyard investors: You might hook up with a corporate superstar of tomorrow while it is still an unknown, underappreciated regional company. Consider, for example, the prescient investors who bought shares of Home Depot, the ultimate householder's supply store that made its 1978 debut in the Atlanta suburbs with only three locations and annual revenues of $7 million. Since the company went public in 1981, shareholders have earned a roof-raising 18,000% as the chain has grown to 309 stores in 25 states, with revenues of $9.2 billion. "You didn't have to do a lot of extrapolation of baby-boom trends to figure out that Home Depot was on to something," says Craig Dickson, research director at Interstate Johnson Lane, a Charlotte, N.C. brokerage. To spot hot local companies yourself, investing pros suggest that you follow these simple rules: -- Scour local newspapers. Look for stories about new or expanded facilities, the awarding of contracts -- even personnel announcements. "If a company appoints a new head of marketing or adds five people in research, that may signal better results down the road," says Murphy. -- Think of Smalltown U.S.A. as a window to corporate America. What if you don't live near a promising company's headquarters? Check out any of its plants or distributorships near you. Chat up the locals about business. Is production humming? Has the plant added or cut a shift? -- Seek advice from a regional broker. Look for brokers who spend the bulk of their time researching local companies and who write their own reports. Get the names of reliable brokers from your accountant, banker or financial planner. To help you pinpoint superstar regional companies around the country, we combed through the 288 stocks in our exclusive Nordby indexes of companies with headquarters in 24 metropolitan areas. We then asked more than 20 regional stock pickers to name their favorites on the list. They singled out seven winners, profiled below in order of projected share-price increases over the next 18 months. (You will find other top-performing regional stocks in the box at right.)

-- THE MIDWEST After two years of sharply declining earnings -- to 2 cents a share in 1993 -- U.S. Shoe (ticker symbol: USR; recently traded on the New York Stock Exchange at $20.25; 1.6% yield) is finally beginning to kick into high gear. Thanks partly to brisk summer sales, the $2.6 billion (annual revenues) ; Cincinnati firm's footwear division will earn $40 million this year, double its take in 1993. But Bandolino boots and Pappagallo pumps are only part of the company's story. The most dramatic turnaround is taking place in sales of women's clothing at U.S. Shoe's 706 Casual Corner stores. Until recently, "the company has had strong brand names but real problems targeting their markets," says Norman Klopp, manager of the Roulston Midwest Growth Fund in Cleveland. Indeed, Casual Corner was still focusing on sporty duds as late as 1991, even though record numbers of professional women were demanding more tailored styles. To cash in on the career woman's market, Casual Corner now stocks attractive, businesslike clothes working women can afford. Analysts believe the makeover will help U.S. Shoe's apparel division ring up estimated profits of $20 million in 1994 and $45 million in 1995, compared with last year's $41 million loss. As a result, Klopp says earnings at U.S. Shoe could rise 35% in 1995 to $1.55 a share, vs. this year's $1.15. He expects the company's shares to rise 58%, to $32.

-- THE WEST COAST While its name is nationally known, $3.9 billion retailer Nordstrom (NOBE; NASDAQ, $38.75; 1%) still caters mostly to West Coast shoppers. That's where the Seattle-based company operates 41 of its 52 stores and generates 70% of its sales of apparel and home furnishings. The West Coast is prime territory for retailers. Sales in the region were up 8% in the 12 months to July 31, compared with an overall U.S. increase of 6%. In order to grab its share of those sales -- and more -- Nordstrom has had to overcome some serious problems. Among them: bad press from a 1990 class- action lawsuit by employees who alleged that Nordstrom owed them back overtime pay. (Nordstrom settled in 1993 for $8 million.) In addition, the recession hurt sales, which grew only 12.5% during the three fiscal years that ended last Jan. 31 -- a far cry from the 19%-a-year average that Nordstrom had enjoyed in the late 1980s. To get merchandise moving, the company installed a computerized information system last year to track what's selling and what's not. That has enabled the company to reduce markdowns as much as 15% a quarter. The payoff: Nordstrom's earnings are slated to rise 29%, to $2.43 a share for fiscal year '94, which ends Jan. 31, 1995, and $2.80 for 1995. Martin Nelson, president of Martin Nelson & Co., a Seattle brokerage, believes the retailer's shares could shoot up 42% to $55.

-- THE WEST Stock pickers in this region, which stretches from Texas to Montana, are looking for zesty returns from Brinker International (EAT; NYSE, $24.75; no dividend), an $855 million Dallas-based operator of seven mostly western restaurant chains with Mexican, Italian and American themes. The largest is Chili's Grill & Bar, with 277 company-owned outlets, which provides 82% of Brinker's revenues.

Brinker's share price fell about 25% last spring, when consumers' diminishing appetite for Chili's fat-laden cuisine took a bite out of revenues; sales dropped 0.7% in April and 1.3% in May. So Chili's started hyping its salads and low-fat grill specials, such as chicken fajitas, instead of burgers. Next year Brinker plans to open 90 new restaurants. Analyst Lynn Detrick of Williams Mackay Jordan & Co. in Houston says earnings could jump 30% to 90" a share in 1994 and to $1.10 in 1995. She expects Brinker's shares to climb as much as 41% to a tasty $35.

-- THE CENTRAL STATES Robust economic and employment growth from Arizona to Wisconsin has caused business to boom at Norwest Corp. (NOB; NYSE, $25.25; 2.9%), a Minneapolis bank holding company with 578 banks in 15 central states. In the 12 months that ended June 30, Norwest's loan portfolio grew 15% to $30.2 billion, compared with its industry's 7% average. That will push 1994 earnings to a seventh consecutive record high of $2.45 a share, up from $2.10 in 1993 and $1.71 in 1992. To keep earnings growing, Norwest has acquired 10 smaller bank companies since 1991, pumping up its assets 43% to $55 billion. In addition, Norwest has aggressively chased lucrative fee-based income from trust accounts, mortgage banking and cash management services. The sideline now accounts for 36% of Norwest's revenues. The company also offers a growing number of nonbank services, from homeowners insurance to credit cards, through more than 1,000 offices throughout the U.S. and Canada. "In the near future, the company's growth will come from selling more services at these locations," says Norman Klopp of the Roulston Midwest Growth Fund. He forecasts that Norwest's earnings will increase 14% in 1995 to $2.75 a share. He also expects Norwest to raise its dividend 20% over the next two years, driving up its share price 39% to $35.

-- THE MID-ATLANTIC When you think of $1.2 billion Manor Care (MNR; NYSE, $26; 0.3%), think beds -- lots of them. The nation's third largest long-term-care provider, Manor Care runs a chain of 164 high-quality nursing homes in 28 states with a total of 22,000 beds. And the Silver Spring, Md. company also owns 2,412 hotels (225,000 beds) with such well-known names as Clarion, Comfort and Quality. The secret to Manor Care's long-term health: the aging U.S. population. In the past 10 years, the company has become the leading provider of care to Alzheimer's patients, with 92 special nursing-home units (totaling 2,500 beds) for victims of the illness. Over the next seven months the company plans to spend $22 million to build six assisted-living facilities for early- to mid- stage Alzheimer's patients. Shrewdly locating its nursing homes in affluent communities, Manor Care attracts the highest number of privately insured patients in the nursing-home industry -- more than 50% of its patients are covered by private insurance, vs. the industry average of around 35%. This puts Manor Care in the fast- growing market's "Cadillac niche." For that reason, Thomas Taylor, research director at Baltimore's Chesapeake Securities, expects earnings to rise 20% to $1.45 a share in fiscal 1994 and $1.65 in 1995. He thinks Manor Care's stock could climb 35% to $35.

-- THE SOUTH Succumbing to the lure of the high seas, roughly 5 million U.S. passengers will have boarded 110 cruise ships by year-end, up 8% from 1993. Partly as a result, Miami-based Carnival Corp. (CCL; NYSE, $41.75; 1.3%) is enjoying its best sails -- make that sales -- ever. Famous for its giant Caribbean-bound "Fun Ships," $1.8 billion Carnival, the largest player in the $10 billion- a-year cruise industry, consistently packs its 19 ships with baby boomers as well as retirees. Indeed, the average Carnival ship cruises at 105% of capacity, meaning that more than two people stay in some double-occupancy cabins. To meet growing demand, Carnival boosted capacity by 16% with last July's launch of its 2,044-passenger Fascination. By 1996, the company plans to add three more megaships with 7,000 berths. Analysts are also applauding Carnival's decision to spin off 90% of its investment in a sideline business, Carnival Hotels & Casinos, to shareholders by year-end. The move "will allow Carnival to concentrate exclusively on cruising," says Joseph Smith, managing director of Miami's First Equity Corp. He is one of several analysts who see rising earnings on Carnival's horizon: a 22% jump, to $2.75 per share in 1994, followed by another 16% hike in 1995, to $3.20. Smith expects Carnival's shares to crest at $55, a 32% gain.

-- THE NORTHEAST Set squarely in two of the economy's fastest-growing sectors, $2.3 billion Olsten Corp. (OLS; American Stock Exchange, $37.75; 0.6%), based in Westbury, N.Y., is the nation's third largest temporary-employment agency and the No. 1 U.S. provider of temporary home health-care workers. Olsten is cashing in on the explosive demand for temporary employees. Over the past decade, the U.S. temporary work force has grown on average six times as fast as the nation's total work force. The growing demand for outpatient care further improves Olsten's prognosis. Says analyst Kenneth Bohringer at Prudential Securities in New York City: "As hospitals continue to reduce costs by shortening the average stay, they will play right into the hands of the home health-care operators." As a result, Olsten's earnings are vigorous: for 10 quarters in a row, growth has topped 20%, with 1994 profits expected to hit $67 million. Analysts forecast that earnings will rise 38% to $1.60 a share in 1994 and $2 in 1995. Bohringer looks for Olsten's stock to climb a healthy 19% to $45 -- which suggests once again that before you consider investing money in a far off company you barely know, you first check out the terrific buys in your own backyard.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: Superstar stocks right under your nose Thanks partly to brisk sales east of the Mississippi, U.S. Shoe heads our list of the seven most promising regional stocks. To pick them, we asked more than 20 regional analysts to name their favorites among the 288 companies in our 24-city Nordby index (see page 173). Pros say these stocks' prices could rise 19% to 58% over the next 18 months, vs. 5% for the S&P 500.