(FORTUNE Magazine) – Only a floor separates the Boston offices of Jeff Vinik, head of the $53 billion Fidelity Magellan fund, and Brian Posner, who manages $11 billion for Fidelity's Equity-Income II fund. But that floor might as well be an ocean when it comes to investing. Vinik is mightily into technology stocks, while Posner shies away. Posner, 34, is passionate about achieving high returns with low risk, and this he has done superbly. Since taking the helm in April 1992, he's steered his portfolio to the best five-year record of all equity-income funds tracked by Morningstar, returning an average 21.9% a year. Although the three-year return is only just ahead of the S&P 500's, Posner's fund has delivered less volatility than the average stock fund. Since Posner, his dad, and his 19-month-old son are all invested in the fund, he has every incentive to keep doing this well, as he reminded FORTUNE's Susan Kuhn.

Why are you afraid of technology stocks?

I want to be compensated for risk. I believe every industry has cycles, and I don't believe I'm being compensated for the cyclical risk in technology today. Instead I'm driven to companies that sell at low prices relative to earnings or book values. I view myself as an owner and ask myself, What is this enterprise worth? What earnings and cash flow can it generate? If I find an attractive company, I am willing to wait 12 to 24 months for prices to rise, but the downside should be limited. I believe in efficient markets; at some point the market will price companies appropriately.

So what does your portfolio look like?

I run a relatively concentrated portfolio of 150 to 175 stocks. My top 40 positions account for 45% of assets. Cash is 10% to 12%, which is normal for me.

My favorite stock, and my largest holding, is American Express. It has had massive divestitures, of Shearson Lehman and the Boston Co. The Travel Related Services and Financial Advisors units have been great generators of cash, but it was hard to see that in the past because the money went to fill holes in the other companies. Travel services has cut the discount rate charged to merchants who accept the American Express card, from 3.1% in 1992 to 2.74%. That cut is equal to about $570 million in lost revenues, but they have offset that by cutting costs and are grabbing market share. I estimate there will be 38 million cardholders this year, up from 36 million in 1994. Its objective is to grow earnings 12% to 15% a year, and that's doable. Even though the stock dropped recently to $40, I think it will be worth $60 in 12 to 18 months.

You own a lot of energy companies. Are you expecting higher oil prices?

I don't know what will happen to the price of crude oil, but I know that if stocks imply a price of $15 a barrel or less, they are a buy, and at $22 or more, I sell them. I like British Petroleum because it is one of the few oil companies generating excess cash and increasing production. In 1992, people feared that BP was on the verge of bankruptcy, and management cut costs and divested businesses to pay down debt. Then BP got lucky, finding oil in Colombia and the North Sea. The $90 stock is worth $120.

I have one group story: oil service companies. Oil prices haven't supported additional drilling capacity for about ten years, and the number of operating rigs has been declining. But now demand is catching up, and we are seeing pockets of tightness. I own big companies like Schlumberger and Western Atlas and little ones like Weatherford Enterra and Tidewater. Schlumberger and Western Atlas collect seismic data for outfits with rigs in place or that are interested in drilling. Based on strong cash flows, Western's $44 stock is easily worth $65. Schlumberger shares, now $60, could be $90 to $100 in 12 months.

After such a strong run this year, is it hard to find good values in the stock market?

I maintain an inventory of ideas of what I want to buy next. In August that inventory was as low as it's ever been. But opportunities are now popping up again. I've been buying a lot of apparel retailers. At the Gap, same-store sales have been flat year over year. But square footage has been increasing 20% a year, and the company has generated returns on equity in excess of 20%. So they are controlling costs and selling products while generating good returns. All I need is someone to buy two pairs of chinos next week, and I make money. The stock is up from $30 in January to $46. If we get positive sales, it could be as much as $65 in 12 to 18 months.