Technology isn't the only cache of growth stocks, of course, and Allan Roness of JWGenesis Capital Markets thinks that Allou Health & Beauty Care (ALU) is a little-known, small-cap nontech that's poised for strong growth.

Allou distributes 22,000 kinds of cosmetics, fragrances, branded and generic drugs, and health and beauty products to such customers as J.C. Penney, Sears Roebuck, Eckerd, CVS, and Wal-Mart Stores. Allou wasn't immune to the market's pullback. It fell from 9 1/16 in February to 6 3/4 on Apr. 26. A year ago, the stock was 13. But Roness believes Allou, trading below its book value of $11.54 a share, is now undervalued.

One reason: robust growth. Chief Financial Officer David Shamilzadeh says revenues will jump from $337 million last year to $428 million this year, and to $640 million in 2001, partly because of acquisitions. Earnings will bloom: Roness figures that from 1999's 20 cents a share, earnings will bolt to 95 cents this year and to $1.17 in 2001. It all stems from a change in Allou's focus, he says.

Sales of high-margin prescription drugs are accelerating and will account for some 50% of sales by 2001, says Roness. This development is partly due to Allou's purchase of Tri-State Pharmaceutical in December. And Allou has gone into producing upscale hair- and skin-care products, where gross margins are about 60%.

The next growth avenue for Allou: offering advice and medical solutions over the Web. Allou's Shamilzadeh sees it serving a $1.5 billion market.

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