(FORTUNE Magazine) – One single, incontrovertible fact about Christine Baxter immediately leaps to attention: She is just 27 years old. Never mind her top performance, her aggressive investing style, the high-performing stocks she finds, and the $1.4 billion she has under management--it's her age that tends to stop conversations. Which means that many people, harrumphing about inexperienced mutual fund hotshots who've never lived through bear markets, completely miss the stellar performance of Baxter's PBHG Emerging Growth fund. And though Baxter is the fund's undisputed top gun, she is quick to credit a pair of mentors: her father, Harold Baxter, chairman of Pilgrim Baxter (the PBHG advisory firm); and star portfolio manager Gary Pilgrim, who runs the PBHG Growth fund.

In the most important arena--performance--Baxter smokes the competition. After three years, her returns (35.1% annually) are more than double the market's as well as those of her small-cap peers. And although her fund tumbled along with all of Nasdaq in July, it is up 18.5% for the year, vs. the S&P 500's 12.2%.

PBHG charges no sales loads, and the fund's annual management fees (a 1.47% expense ratio) are slightly below the small-cap fund average (1.52%). Morningstar thinks highly enough of Baxter's fund to give it its highest rating, five stars. FORTUNE's John Wyatt recently talked with Baxter about everything from her tender age to tomorrow's hot stocks.

Earnings growth for the companies in your portfolio averages 63%, but you still got hit in the big summer selloff. Are you bouncing back?

Yes, many of our stocks are already returning to where they were in late May. These companies continue to excel in their businesses regardless of the stock market--and grow earnings at phenomenal rates. We're already seeing good reactions to the positive earnings reports, and cash flows into aggressive-growth mutual funds have begun to pick up again. So things look promising.

You're willing to place big bets, such as the fund's 37% stake in technology.

We won't go higher than 40%--our top limit on any given sector. And the types of technology companies we own are a diversified group--software, help-desk, and networking companies. Right now some of the tech stocks I like include VideoServer (VSVR, Nasdaq), which makes videoconferencing servers, and Visio (VSIO, Nasdaq), which makes software that enables you to integrate graphics into companywide systems.

What's hot about these companies?

VideoServer trades at $32, down from close to $42 at the end of May. The company's main product is a multimedia conference server that they sell to other equipment manufacturers, like Northern Telecom, as well as to the regional Bells. No matter how this market develops--whether the telephone carriers provide videoconferencing service or whether companies buy their own equipment--VideoServer is the dominant player and will benefit from the growth. Operating margins are above 20%. We estimate long-term earnings growth will exceed 50%. The stock's P/E is 35.5 times next year's earnings estimates.

Visio is $44.25 and trades at 44 times 1997 earnings estimates. They have a program that creates flow charts and graphics, which can be integrated into SAP management software or into Microsoft Windows. Overseas earnings account for 35% to 40% of the total. Earnings grew 90% in the most recent quarter, and we expect long-term growth of 45%.

The consumer sector is another bet of yours. Which stocks look promising?

I like Papa John's International (PZZA, Nasdaq), which operates a chain of takeout pizza restaurants. The concept is very simple--just good low-cost pizza--and the company typically develops strong relationships with experienced franchisees. The annual earnings growth rate since the company went public in 1993 has been over 40%. They've survived numerous promotional discounts from competitors like Pizza Hut, and now with 1,000 stores they have greater leverage for advertising. The stock is $51.25 and trades at 39 times our 1997 earnings estimates. In a year it could easily return 40% as the stock price increases with the earnings growth.

I also like Wilmar Industries (WLMR, Nasdaq), a distributor of maintenance products to apartments--plumbing supplies, doorknobs, hinges, vents, windowpanes, you name it. The company sells directly to maintenance managers via telephone and catalogues in 42 markets from 15 distribution centers with next-day, or two-day, delivery. They have room to increase both the products they supply and the markets they serve. The stock was $28 before the July selloff, and now it's $23. It trades at 33 times next year's estimates, which is in line with its long-term growth rate of 35%.

Any health care favorites?

Renal Treatment Centers (RXT, NYSE) provides dialysis treatment for people suffering from kidney failure. The stock is $31--down from $35--and earnings are increasing 40% a year. People are living longer, and more and more need dialysis. The company operates roughly 100 centers and has 7,000 patients. Since patients require dialysis treatments two or three times a week, the business is highly predictable. Operating margins are 17%.

With such fast growers, what's your strategy for sidestepping the inevitable blowups?

Well obviously sometimes a company will blow up on us. But we try to understand what's driving the company's growth, what the risks are to that growth rate, and what the potential is for that growth rate to accelerate. If a company is to sustain a 40% to 50% growth rate over the long term, we have to continually ask ourselves about the ongoing viability of their strategy. Is the risk to earnings sustainability getting higher or lower? Is there evidence that new products give them stronger competitive positions? How are they developing their distribution channel? We build a long-term view of these companies block by block and stay on top of them.

So, Christine, what do you tell people who worry about your age?

You hear the refrain about young money managers over and over. Do I want to go into a bear market? No. But am I confident about the team of people around me and the system we run? Absolutely. I work within an investment team that brings a wide range of experience and varied perspective to the table. True, I'm young, but I've been around the markets all my life.

And youth brings its own powerful skill sets to the mix, which you don't hear about as much. This business requires a tremendous amount of work, and young people are more willing to put in those long hours. Particularly in the fast-growing emerging companies that we invest in, it is useful for portfolio managers to be readily adaptable to change and to easily understand technology and its possibilities. In most of the businesses we invest in, the companies and the employees are quite young themselves.