(FORTUNE Magazine) – The late Sixties, Berkeley, the counterculture . . . Sure, Paul Stephens was there, but not for the free love or LSD: He was grinding out his master's thesis on how then-private brokerage houses might fare if they offered shares to the public. Nowadays, of course, many a Wall Street firm does just that -- and Stephens, 48, looks like a visionary. As chief investment officer for the firm he helped found, Robertson Stephens & Co. in San Francisco, he puts some of that same vision to work at the Robertson Stephens Orphan fund, a limited partnership that invests in companies not widely followed by Wall Street. From its inception in March 1990 through May 1993, the fund returned an average of 33.6% annually before managers' fees, vs. the S&P 500's 11.1% % over roughly the same period. Stephens recently launched the Robertson Stephens Contrarian mutual fund. He tells Fortune's Richard S. Teitelbaum what looks good now.

The market seems pricey these days. What's your take? I'm bearish. We're in for four to five years of stagflation, so about 50% of my portfolio is in gold-mining and gold-related stocks. Many are what I call ''growth'' gold stocks, companies that are expanding through either exploration or acquisitions. Vancouver's Royal Oak Mines has been buying up unprofitable Canadian mines for two years at a fraction of their cost, and it's been cutting expenses, which has led to some ugly union fights. If gold hits $500 to $600 an ounce, as I expect, the shares could more than triple to $20. On the exploration side, two other companies, Golden Star Resources of Denver and Cambior of Montreal, jointly own the largest South American gold mine -- in Guyana -- and are very active in the Guiana Shield, a belt across Venezuela, Guyana, Suriname, French Guiana, and Brazil that could be one of greatest finds ever.

What about the big gold-mining companies? Our favorite is Homestake Mining in San Francisco, probably the most unloved gold stock on Wall Street. It performed particularly poorly over the past few years because management didn't hedge its gold sales. But with gold prices rising, that's exactly why Homestake will do far better than the other gold companies that are hedged. Plus Homestake's costs per ounce of gold have declined from around $270 to $220.

So much for gold. What about the other half of your portfolio? Well, we're short 25% of the Contrarian fund's assets. About 3% are puts against the S&P 500, and the rest are short sales against three industries.

Which are? I don't want to mention names, but some are what I call ''cult'' technology stocks, ones that are vastly overpriced. Then there are some financial services companies, especially mutual fund management companies: Their bubble has got to burst, and there's plenty of insider selling going on to show that management knows it. Last, there are a lot of the restaurant stocks that were bid up to astronomical heights: Some have been getting hammered recently.

That still leaves about a quarter of your portfolio unaccounted for. The rest is primarily a play on real estate and other hard assets. The past ten years have been wonderful for financial assets, but the next five will be great for tangible ones. One of my favorites is Maxxam of Houston. It's a company with sales of $2 billion but virtually no Wall Street following, the biggest orphan I've ever seen. It owns Pacific Lumber, which is the largest producer of redwood lumber. That business has operating margins of 30% on sales of about $220 million a year, but everybody is scared of the environmental worries. Maxxam's second area is commercial and residential properties in California, Texas, Arizona, New Mexico, and Puerto Rico. The chairman, Charles Hurwitz, bought the Texas properties from the Resolution Trust Corp. for a song. Maxxam also owns 70% of Kaiser Aluminum. Everybody hates aluminum now the way they hated gold and natural gas last year, but it too will rebound. Maxxam stock trades at $26 a share, near its low, but it should rise to more than $80 in the next up cycle.

Any other hard asset plays? I like St. Joe Paper, which owns about 3% of all the land in Florida. It also controls 54% of another great stock we own -- Florida East Coast Industries, which has a railroad from Miami to Jacksonville, as well as real estate along the route. These are the best stocks I know of if you're looking ahead to when we lift the trade embargo against Cuba. Another company I like is Millicom of New York City. It holds cellular phone franchises in emerging markets like Guatemala, Pakistan, the Philippines, Sri Lanka, and Moscow. Its shares trade for $12, but over the next three to five years I expect them to rise to $50 to $75. The beauty is that, once again, there's almost no Wall Street coverage.

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