(FORTUNE Magazine) – Too few thirtysomething guys worry enough about investing for retirement. But Harris Leviton, 33, frets aplenty. As manager of the Fidelity Retirement Growth Fund, he has responsibility for $3.2 billion in IRA, 401(k), Keogh, and other assets with tax advantages. His prowess at picking inexpensive growth stocks is the main factor in the fund's winning three-year annual rate of return of 16.6%, vs. 9.2% for the S&P 500-stock index. Leviton, who began managing the fund in March 1992, recently explained his strategy to FORTUNE's Antony Michels.

How does the fund's retirement focus affect your stock-picking strategy? The worst thing that can happen when you retire is you have no money because you've squandered it all on stocks with high price-to-earnings multiples and they've all blown up. So I try not to take too much risk. Next worst is not having enough money because you didn't take enough risk. I try to balance the two by buying growth stocks at a discount. I want companies with a P/E of ten whose earnings are growing 15% to 18% a year. I like stocks where if I'm wrong, I'll lose a few dollars but I won't lose 80%. And if I'm right, I could make 50% to 80%.

Is this market friendly to your style? When you're four years into a bull market, ten P/E growth stocks don't grow on trees. That's one reason about 24% of the portfolio is in cash. It's a very dangerous market. It's tough to find what I like. ! What sort of companies make the cut? Many of my positions are stocks whose current P/E doesn't reflect what's really going on at the company. One of my largest holdings is American Bankers Insurance Group in Miami. Its biggest product line is insurance that pays off what you owe on credit cards if you lose your job, become disabled, or die. Credit card growth has been astounding over the past few years, and ABIG is a good way to play that. The industry is consolidating, and ABIG is gaining share. At $20.25, the stock is unbelievably inexpensive. It trades at 6.8 times 1995 estimated earnings and yields about 3.6%. The company has had some problems in the past, including losses that stemmed from the Los Angeles earthquake. But I think earnings could grow 15% to 20%, starting in 1995. If it delivers on the earnings, I expect to see the stock at $32.

Do you ever buy stocks with higher P/Es? In some cases, if it's inexpensive on other measures. One example is SunGard Data Systems, a computer software and services firm in Wayne, Pennsylvania. Its biggest business is cost-effective back-office accounting for financial services companies. Fidelity uses the company for trust accounting and processing. Recurring revenues for SunGard's business are about 85% of sales, so it has steady profits. The stock is $37.38, about 15 times 1995 earnings, and annual earnings growth is about 15%. So on the surface, it's not inexpensive. But the earnings are understated because the company makes lots of acquisitions and has a lot of goodwill to amortize. Its cash earnings are a lot higher. The stock trades at about ten times free cash flow, making it a buy. It should hit $50 within a year. Another stock that's not cheap on current earnings is Whole Foods Market, a chain of natural foods stores spread across the country. The company has gone through a transition year, and earnings growth really stalled. At $15, the stock is trading at about 25 times earnings for the fiscal year that ended in September. But this year the company will really ramp up the growth. Whole Foods is going to increase the store count, now 36, by about 25%. Revenues should grow about 35%, and I think earnings growth will match that in the next fiscal year. Natural foods fit in with the trend that wealthy people want to eat healthy. I'm looking for the stock to go into the low 20s in the next 12 months.

Health care stocks are 7% of your portfolio. What companies do you like? One of my largest positions is Warner- Lambert, which has had some problems over the last few years. Some of these have been endemic to the industry, such as the pricing pressures on prescription drugs imposed by HMOs. Management is emphasizing profitability and cost cutting and is focusing on its drug pipeline to turn things around. The parts of this company -- pharmaceuticals, over-the-counter products like Listerine, and confectionery goods like Trident -- are worth considerably more than the current stock price of $74.25, about 14 times next year's estimated earnings. I think earnings growth will accelerate in the next year or two as the company gets its act together. There's downside protection because if the stock gets too cheap, the company could buy back shares or someone might try to acquire it. The stock should get to $90 or $100 in the next 24 months.

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