(FORTUNE Magazine) – Snow, not money management, is what brought Todger Anderson to Colorado in 1968. A Michigan native who went to college in Maine, Anderson, 48, is an expert skier who indulges his habit 50 days a year. His skill on the slopes is matched by his talent managing the $228 million Westcore Midco Growth Fund for Denver Investment Advisors. Run by Anderson since its inception in 1986, the fund, which charges a 4.5% sales load, boasts a five-year annual total return of 20.9%, compared with 16.1% for the S&P 500. Anderson began investing for pension funds in 1975 and still manages $3.5 billion of pension money, which is allocated to the same stocks as his mutual fund. He made the case for mid- cap stocks to FORTUNE's Antony Michels.

Why are mid-cap growth stocks attractive? The bulk of new products and services come from entrepreneurs, and many mid- cap companies are entrepreneurial outfits that have grown up. They have experienced managers and the necessary structure to sustain rapid growth.

How do you define your universe? A company has to have at least a $100 million market cap or $100 million in revenues; we won't consider the 100 largest companies on the FORTUNE 500 industrial list or the 70 largest from the service lists. Beyond that, we look at companies one by one. The companies that do well come from many different industries. Health care, specialty retailing, gaming, telecommunications, and media are all exciting.

What draws you to a stock? We make money by observing change early -- product innovations, modifications in marketplaces, shifts in management. A good illustration is Cellpro, a health care company that has hardly any sales. Cellpro has a technique to eliminate many side effects of bone marrow transplants in patients undergoing chemotherapy. The company extracts stem cells, the parents of blood cells, from the marrow and concentrates them to be reinfused in the body after chemotherapy. The treatment is in phase-three clinical trials, and we expect the company to market it in the U.S. in 1995. It could have revenues of $140 million by 1997 and a growth rate of 30% a year for the rest of the Nineties. The stock is currently selling at about $16 a share.

You seem to have singled out a lot of opportunities in the medical industry. Our largest holding is United HealthCare, which specializes in cutting benefit costs through so-called managed health care. It owns or manages 20 HMOs and markets nine services, such as one that monitors prescription drug costs. A lot of companies try to do the same things, but United HealthCare is the best. The stock sells for about $65, or 30 times estimated 1993 earnings. From 1992 to 1997 we expect 28% compound annual earnings growth.

Consumer stocks make up 60% of your portfolio. Why? Consumer businesses account for a bigger share of the economy than ten years ago. Many of our favorites are specialty retailers: People are always finding new and better ways to sell. We own Michaels Stores, a 168-store chain that sells home decorations such as silk flowers, picture frames, and arts and crafts items across the West and South. We expect profits to grow 20% to 25% annually for the next four or five years. Callaway Golf is another consumer stock we like. The company makes golf clubs. Normally I avoid athletic equipment because the market tends to be faddish, but Callaway is here to stay. It developed a stainless-steel driver called Big Bertha that has a bigger sweet spot than usual, so the average golfer can hit better drives. Even more exciting is Callaway's new Big Bertha seven-wood that you use in place of your long irons. The company's founder and CEO, Ely Callaway, is a superb manager. The stock trades at 17 times this year's estimated earnings. We think earnings can grow at a 20% rate for each of the next three or four years. A few consumer soft-goods companies have low-cost operations and tremendous market identity. Nike is one. Another is Fruit of the Loom, which has transformed itself from an underwear maker into a brand-name casual apparel company. About 30% of its business is in T-shirts, and everybody's wearing T- shirts. We think earnings will grow by 20% a year for the next four years. The stock sells at 15 times estimated 1993 earnings.

Some analysts warn of a correction in small- and mid-cap stocks. Where's the market going? I don't foresee anything big enough to be called a correction; I can imagine a drop in mid-cap stocks of perhaps 5%. But I don't know. I can't figure out what the market is going to do. All I know is that success takes a long time, and it takes diversification -- I own 125 different stocks. And if you hang in there, you get good rates of return.

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