(FORTUNE Magazine) – Though Ed Brown, 54, was trained as an electrical engineer, first at Howard University and later at NYU, where he got a master's in the field, he has found his true matier engineering sizzling returns for investors. As founder and president of Brown Capital Management, located in Baltimore, Brown wrought 19.7% average annual gains over the past three years, well above the 13.2% returns registered by the S&P 500 index. That, no doubt, has pleased his clients--the pension funds, high-net-worth individuals, and mutual fund shareholders who have entrusted something over $1 billion to his expertise. Brown recently talked with FORTUNE's John Wyatt about stocks that still pack a wallop.

What's your approach to picking stocks?

We try to get a lot of bang for the buck by not paying too much more than the market for a stock while finding companies with dramatically superior earnings growth and return on equity. The P/E ratio for our portfolio is about 15 times next year's earnings, a shade above the multiple for the S&P 500. But the portfolio's five-year estimated growth rate is 18%, more than twice most predictions for S&P earnings growth.

I see you have two nursing home stocks. Aren't you worried about cutbacks in Medicare and Medicaid reimbursements?

Manor Care and Health Care & Retirement offer the kind of value that was available in the big pharmaceuticals 18 months ago. At about $30, you can buy Manor at 16 times our 1996 earnings estimate, which is pretty close to the market. I consider the company the Cadillac of its industry. We project that annual earnings growth will be 15%, double the rate of the S&P. There's an equally good case to be made for Health Care & Retirement. At $29, it trades at just 16 times our earnings estimate for next year. We think long-term earnings will increase 20% a year.

You're right. The market is discounting these shares because of the talk emanating from Washington about changing the reimbursement rates of Medicare and Medicaid. But these particular companies have a very high percentage of patients who pay privately, and thus will be less affected by any reform. Meanwhile, their growth potential is enormous, given health care trends. Administrators are moving patients out of acute-care hospitals more quickly into longer-term care facilities like these that operate at lower cost. I think both stocks will reach $38 within a year.

You also own some REITs. Where's the bang there?

We think Post Properties and General Growth Properties will offer above-average returns over the next year or so. Post operates apartments mostly in the Atlanta area, where demand is growing almost twice as fast as supply this year. We estimate funds from operations [the REIT equivalent of earnings] will rise 12% per annum. At $30, the stock trades at just 11.5 times our 1996 earnings estimate. Unlike growth stocks that have very low yields, or none at all, Post pays out 6.4%.

General Growth, which is based in Des Moines, owns shopping malls, many in the Midwest, and yields a safe high 8.4%. The $20 shares sell at about ten times our 1996 earnings estimate. With big payouts and price appreciation in line with earnings growth, we think the total return to investors will be 18%. Not bad, whatever your investing style.

Where else can investors look?

Both Vishay Intertechnology and Equifax still have room to run. Vishay's stock is $37 now, and we think it will be $45 within 12 months. Vishay is the dominant supplier of "low tech" components like resistors, sensors, and capacitors that all kinds of manufacturers need by the ton to produce all kinds of electrical devices, including computers. Since Vishay's customers range from AT&T to General Motors, its shares aren't subject to quite the same sharp sell-offs that can afflict high-tech companies like Intel. We estimate earnings will average 18% over the next three to five years. Since the stock trades at a discount to that growth rate--just 17.5 times our 1996 earnings estimate--we think it's a bargain.

Equifax shares trade at roughly the same price as Vishay's, and our 12-month target is the same too: $45. The company provides credit reports and verifies credit card transactions in stores. Sophisticated information systems already in place will make it easier for the company to expand. We are estimating Equifax's earnings will grow 15% per year long term. The P/E multiple, based on our 1996 earnings estimate, is 16.