Europe is hot. During the first half of 1998, 16 foreign markets outperformed Standard & Poor's 500-stock index - and 15 of them were European. While the S&P 500 gained 13.6 percent, mutual funds that invest exclusively in European stocks rose an average 24.6 percent.

Fortunately, it's not too late to get on board, says Money magazine. A recent pullback in European markets, caused by turmoil on other international exchanges, has created buying opportunities. What's more, European economic growth is just beginning to accelerate. The approach of the European Monetary Union in 1999 has spurred a drop in interest rates across the continent, making it much cheaper for European companies to finance expansion.But European stocks have also become more costly, notes Money. Price-to-earnings (P/E) ratios now average 21 (up from 17 less than a year ago), compared with today's S&P 500 average of 24. But Europe's earnings are forecast to grow an average 16 percent this year, vs. just 7 percent in the United States.

To help you spot the best opportunities in Europe, Money recently asked the managers of three top European funds to name their favorite stocks. The three they picked are all listed on the New York Stock Exchange.

Steven Chamberlain, co-manager of the Invesco European fund (no-load, 1-800-525-8085) snaps up fast-growing blue chips, as well as promising growth companies in the midst of restructuring. His pick is the French telecommunications and electronics maker Alcatel Alsthom.

Once a sprawling conglomerate with mediocre management, Alcatel now has an energetic team busy shedding noncore businesses to focus on telecommunications. Among Alcatel's high-growth products are two Internet-related technologies - ASDL, which transmits video, voice and data over copper telephone lines at high speeds; and SDH, which sends the same information over fiber-optic cable. Chamberlain expects both to help fuel 25 percent earnings growth in 1999.

Bartlett Europe A (4.75 percent load, 1-800-800-3609) also invests in large-company growth stocks. But co-manager William Lovering pays particular attention to smaller countries. He recommends Bank of Ireland, that country's second-largest financial services company.

"Half the Irish population is under 30 and entering the period of investing in housing," Lovering explains. Though the bank's earnings have been growing at 20 percent a year over the past three years, its P/E of 18 is below the average European bank multiple of 23.

In his hunt for undiscovered stocks, Rein W. Van der Does, manager of Smith Barney World Funds European Portfolio (5 percent load, 1-800-451-2010), invests in medium-sized growth companies and some larger corporations. He recommends Nokia, currently growing 20 percent to 25 percent a year in the sizzling cellular business. The Finnish company is the global leader in fast-growing digital cellular phones, which offer greater security than traditional analog devices do, plus features like e-mail and caller ID.

"The cell-phone penetration is unbelievable," Van der Does told Money. "It should grow at a rate of 20 percent a year over the next few years."

(Money magazine, Time/Life Building, Rockefeller Center, New York, NY 10020; 13 issues, $39.95.)