(MONEY Magazine) – Buy the best, avoid the rest, and never sell on bad news.'' By following this credo, veteran money manager Richard Cheswick, 66, benefited fully from the wartime stock rally that boosted the Dow 18% -- unlike many of his peers. He also stood pat in bear-ravaged 1990 and gained 9% while Standard & Poor's 500- stock index lost 3%. That return placed him sixth in CDA Investment Technologies' year-end performance ranking of 474 money managers. As a group, they lost 6%. Cheswick did even better over five years, ranking second with a 126% return vs. 85% for the S&P 500. And as of mid-March, he was up 26% for 1991 vs. 13% for the S&P. Better yet, any diligent investor can emulate Cheswick's strategy, which he has followed for 41 years. For starters, his Cheswick Investment Co. in Greenwich, Conn. shuns short-term market timing with the $400 million that it deploys for institutions and wealthy families (minimum ante: $5 million). He also disavows broad diversification. His top 10 holdings, mainly of blue-chip drugmakers, account for 75% of his 28-stock portfolio. And he steadfastly swears by growth stocks as the best wealth builders, even with the Dow flirting with an all-time high. Which ones? Cheswick recommends eight (see the table at left). ''My goal in early January was a 50% return over two years,'' he told writer Junius Ellis. ''I'm already off to a great start.'' Interview highlights: Q. How high might stocks go? A. I really don't care. Most S&P 500 stocks aren't worth owning because of their sluggish or erratic profit growth, which I doubt will average more than 4% annually over the next three years. I'm confident, however, that the stocks I own can sustain long-term growth of at least 15% a year -- or nearly four times the norm -- and double my money in five years or less. Q. Aren't blue-chip growth stocks rather pricey these days? A. To the contrary, most of my stocks are selling in line with, or at modest premiums to, the S&P 500's earnings multiple of 17 (based on analysts' median profit forecasts for 1991). Amazingly, growth stocks as a group are now cheaper relative to the S&P 500 than in 1974's big bear market. Then, these stocks' average earnings multiple was roughly 100% higher, down from a 200% premium at their peak. Today they command an average premium of only 68%. This price/earnings spread could double before growth stocks top out again. Q. What have you been buying lately? A. Heading the list is Philip Morris, the world's No. 1 cigarette maker and second largest food company after Nestle. Many investors avoid Philip Morris on grounds that its main business is unhealthy, addictive and nearly stagnant in the U.S. But booming foreign sales and profits ensure brisk 22% growth that's priced at a ridiculously cheap 14% discount to the market's P/E. With Coca-Cola I'm counting on 18% growth led by seemingly insatiable demand overseas. Yet Coke sells for only a 34% premium to the average stock. And I'm ! heavily invested in drug stocks. Q. Why drug stocks? A. The rapidly expanding medical sector -- drugmakers, hospital suppliers and for-profit medical centers -- has long provided my highest returns for the least risk. Since health is a priority in good times and bad, these stocks are recession proof. What sets mine apart is their ability to fund the research and development that sustain superior growth. The standouts in order of their relative weights in my portfolio: Merck, Bristol-Myers Squibb, Alza, U.S. Surgical, Johnson & Johnson and Eli Lilly. Q. How do their P/Es stack up? A. Lilly is the cheapest at 17 times forecast 1991 profits, roughly the same as the S&P 500. The main reason is investors' unwarranted fears about a rash of lawsuits claiming that Prozac, a blockbuster antidepressant that accounts for 15% of Lilly's $5 billion in sales, can trigger violent behavior. Alza's P/E of 57 is by far the most expensive -- and worth it, based on my projected 30% earnings gains for the firm's drug-delivery systems such as skin patches. Three-quarters of its $109 million in revenues comes from research and royalty fees paid by major drugmakers that are eager to marry their products to Alza's technology. Q. What's the story on U.S. Surgical, which has incurred the wrath of animal- rights activists for its experiments on dogs? A. Gangbuster profit growth that should average 40%. This $514 million pioneer of surgical stapling instruments is also a major innovator in laparoscopy -- a faster, less invasive way of removing, say, gallbladders -- and synthetic sutures that eventually are absorbed by the body. Q. What have you been selling? A. I'm reducing my holdings in one of my biggest winners -- media conglomerate Capital Cities/ABC. I've accumulated the stock since the mid-1960s, when I landed Bill Casey as a client. ((Casey, then a Capital Cities director, later ran the CIA; see page 169.)) Thanks to the company's shrewd acquisitions in broadcasting and publishing, its stock climbed from a 1974 low of $17 to last July's peak of $633. But its recent price of $464 reflects concerns, which I share, about the company maintaining above-average growth in a business beset by rising competition for audiences and advertisers.

CHART: NOT AVAILABLE CREDIT: Source: Institutional Brokers Estimate System CAPTION: EIGHT THAT SHOULD GROW ON YOU These companies are ranked by Cheswick's estimates of annual growth in earnings per share (EPS), one yardstick of a stock's potential appreciation. Alza trades on the American Stock Exchange; the rest are listed on the NYSE.