Heaven scent.

• Position: Best performing stocks for 1997 - Cover Story

Things are looking up for a lot of Tar Heel stocks. Our panel of pros sniff out the best bets for 1997.

Speedway Motorsports Inc. and Laboratory Corporation of America Holdings, the two newcomers to BUSINESS NORTH CAROLINA's list of stock picks last year, had very different rookie seasons.

Since Speedway cruised onto the scene as a publicly traded company last February, the stock-car racing promoter has been a Wall Street darling. Fueled by the sport's growing popularity, it zoomed 85% from Oct. 20, 1995, to Oct. 21, 1996, by far the largest gain of any stock our panel of prognosticators picked.

On the other hand, LabCorp, an operator of clinical labs, took to its sick bed as the company suffered from heavy debt and merger-related problems. It slumped 62%, the worst performer of the group.

The stocks' divergent fortunes reflected the bumpy and relatively unimpressive performance of last year's picks. They generated an average return of 19%, behind both the Dow Jones Industrial Average's 27% gain and the S&P 500's 21% growth. In 1995, the panel's 27% gain beat the Dow. Across the board, the 1996 results were good but not great - five of the 19 picks grew 40% or more, compared with eight in 1995. While Speedway's gain is impressive, it didn't match Medic Computer System's 138% increase in 1995.

Last year's panelists were particularly enamored with banks, putting five on their list. The trend continues with this year's panel, which chose three banks - CCB Financial, NationsBank and Southern National - for 1997. Why those bets? In a word: consolidation.

"There's a real good likelihood that in three to five years there will be just a few banks, and the banks taken over will be taken at a premium," predicts Charles C. Patton, a director at Cornerstone Capital Corp. in Winston-Salem. He picked Southern National, partly as a takeover candidate. In November, after the panel had made its picks, it announced it would acquire United Carolina Bancshares, which will likely dampen earnings in 1997. But in the long run, he thinks the deal might make it even more attractive to out-of-state banks.

Like most pickers, Patton is positive about prospects for 1997 but calls for caution after the big market gains of 1996 and 1995. "I'm not a gloom-and-doomer," he says. "But everybody's starting to think that we're in some rarified air here and that it's getting harder to get oxygen."

Jim Green, president of Sunbelt Capital Management in Charlotte, picked Southern National last year. He liked its acquisition of car-loan company Regional Acceptance in August. With the industry getting more competitive, he says banks need to increase their nonbanking income. But he has eschewed banks for 1997 and stuck with an old favorite, mobile-home maker Oakwood Homes, for the third time in a row. It's risky to go to the well too many times, he says, but the best returns come from long-term investments in industry leaders. He worries that inflation might "start to sneak in a little bit" in 1997 and that, while it should be a reasonable year for stocks, "it's going to be tougher."

Dick Austin, a Charlotte-based partner with J.C. Bradford, says he went beyond the conservative philosophy practiced at the brokerage to pick high-growth stocks for '96. His bet paid off. Austin's picks generated the highest return of the group, 34%, though that's behind his 59% gain in 1995. It was Speedway that led the way. "The sport is growing by leaps and bounds and the company will continue to do well," Austin says. Speedway's on his list again for 1997. It's not surprising he's keen on the company - J.C...