George M. Yeager is fond of an old saying by Andrew Carnegie that pretty much sizes up how he runs the U.S. Global Leaders Growth Fund.

The quote, Yeager says, often is incorrectly written: "Put all your eggs in one basket and watch the basket."

The misquote is missing a vital word. "What he actually said was, 'Put all your good eggs in one basket and watch the basket,'" he says.

That, Yeager says, is basically what he does in managing the fund: He picks a handful of nice shiny eggs and lets them incubate. In virtually all cases, those eggs are well-known companies with a popular consumable product, recurring revenues and a global reach. Hence, blue-chip growth companies, such as McDonald's Corp., Coca-Cola Co., Wal-Mart Stores and Gillette Co., are among the fund's mainstays.

Technology companies? With a few exceptions, look elsewhere for those. In the lexicon of Yeager's egg approach, those are of the scrambled, poached and fried variety.

As Yeager puts it, people can be expected to keep buying razor blades, bubble gum and soda over and over again. But he feels the same can't be said for Internet infrastructure, computer chips or software.

"We're looking for companies that provide a service or sell a product that is consumed or needs to be replaced," he says.

Yeager, who has managed separate accounts for wealthy individuals for decades, is trying to market the fund as something that investors can use as a core holding in a diversified portfolio, along with, let's say, an S&P 500 index fund. Indeed, the companies the fund holds are invariably members of that index. That's why the U.S. Global Leaders Growth Fund recently adopted "The Nest Egg Fund" as its official nickname.

"It's saying you're not scrambling these eggs-you're letting these eggs mature," he says.

Simple, straightforward and focused. That's how famous financiers and investors such as Carnegie and Warren Buffett have made their fortunes. Yeager, who loves to quote such personalities when talking about his own investing style, thinks it's a sure-fire key to success-especially during the type of bearish market investors are grappling with now.

"A slow-growth environment is where our results shine," he says.

Time will tell. Founded in 1995 by Yeager, Wood & Marshall of New York-an investment firm whose roots go back to 1944-the U.S. Global Leaders Growth Fund has only $80 million in assets and a short track record.

So far, however, the fund's results give reason to take notice. As of March 31, the fund has gained an average of 17.56% a year. It was one of the top-performing large-cap growth funds in the nation in 1997, with a return of 40.5%, despite having few investments in technology. It followed that performance with a 32% return in 1998.

When compared with other large-cap growth funds, its worst year was 1999, when its 7.9% return placed it in the 99th percentile, due largely to a small tech weighting, according to Morningstar. "That's not surprising, because this kind of fund is not going to excel when momentum stocks are in favor," says Morningstar equity fund analyst Kelli Stebel.

Pegging this fund is difficult. Although categorized as a large-cap growth fund, growth expectations are only one of several key criteria used to screen stock selections. Even though Yeager's conservative principles often are closely aligned with those of value investors, his stock selections frequently have high price-to-earnings ratios when compared with the S&P 500. And while the fund's holdings generally are all S&P 500 companies, the fund, with only 19 holdings currently, doesn't present itself as an index of any sort.

That's why, Stebel says, the fund has been a tough sell-especially during the go-go technology-driven 1990s. "This investment could be considered a little stodgy," she says. "What story would you rather hear on the nightly news: a company that makes batteries or some Internet software company that is revolutionizing the way people do business?"

Yeager acknowledges the fuzzy nature of the fund, saying, "It's not something you can explain in sound bites."

Yeager, in fact, expresses disgust at the hour-by-hour mentality of today's market. He keeps his office television tuned to CNBC throughout the business day, but he leaves the sound off. "I've always had a long-term focus," he says.

He started in the investment industry in the public relations office of the Federal Reserve. A few years later, in 1960, he went into private practice in New York City as an analyst and account manager for Franklin Cole & Co., which was founded in 1944. After a couple of reorganizations, that firm evolved into Yeager, Wood & Marshall, whose offices are located in the heart of midtown Manhattan.

Yeager, who manages the U.S. Global Leaders Growth Fund with George P. Fraise, says the fund mirrors the separately managed accounts the firm has handled for its high-net-worth clients for decades. Since 1989, clients' blue-chip portfolios have gained an average of 19.2% per year, compared with 16.7% for the S&P 500 Index. Early on, he says, the firm began to realize that "the common denominator of 80% of our mistakes was the absence of a recurring revenue stream."

Yeager points to three criteria that form the basis of the fund's entire bottom-up stock selections: pricing flexibility, recurring revenue streams and global reach.

When he says pricing flexibility, Yeager indirectly is saying that he doesn't want any part of a company that is vulnerable to a good old-fashioned price war. Speaking the day after Intel Corp.-a mainstay of many large-cap growth funds-announced a 50% slash in Pentium computer-chip prices, in what was viewed as a move directed at arch competitor AMD, Yeager borrows an analogy he says he got from Buffett. "We're looking for companies with moats-an impregnable market position in some facet of their business."

It is that moat, he says, that provides a company with sustainable growth and forward-looking growth potential. So what's a moat in real-life terms?

Yeager points to Wm. Wrigley Jr. Co., which the fund bought about four years ago. The company basically has only one product: gum. That's not exactly a high-growth product. But, Yeager says, Wrigley's has a moat. "They have no global competition," he says. That fact, along with the Wrigley brand name, gives the company pricing muscle and prospects for good steady growth. "That's why we prefer bubble gum over computer chips," he says. "What you have is a well-protected revenue stream in a slow-growth economy."

Even when there is competition, a strong brand name by itself can give a company the pricing protection it needs, he says. He cites Gillette's ability to roll out higher-priced premium batteries when a competitor gets aggressive with pricing. And Starbucks Corp. landed on the fund's holding list after Yeager became convinced customers happily pay a premium for coffee if the Starbucks name is attached.

Not only does customer loyalty strengthen earnings prospects, but it also lays a foundation for introducing new products, Yeager says. "On top of those recurring revenue streams, these companies can introduce new products," he says.

In the case of Starbucks, the company has started selling sandwiches, sweets and supermarket products, including the nation's best-selling brand of coffee-flavored ice cream, Yeager says. "Our older clients don't understand why we're invested in Starbucks. But their children do," he says.

Though the past year has challenged many large-capitalization growth funds, the U.S. Global Leaders Growth managed to dodge a lot of bullets, partly because it bailed out of technology. For the 12 months ending March 15, Lipper Inc. ranked it as the top-performing large-cap growth fund out of 501 such funds. A large weighting in such health-care and drug stocks as Abbott Laboratories, Johnson & Johnson, Merck and Pfizer played a key role in the fund's recent performance.

There are times when the moat is more of a mirage. AT&T Corp., for example, was a company that fit the fund's investing scheme in just about every way back in 1999. The power of the company's brand name was indisputable. Its global growth potential was bright. And it still was the far-and-away frontrunner in long-distance telephone revenues.

Yeager bought the company that year, largely on AT&T's plan to unite long-distance, local telephone, cable-television and wireless-phone services into one service package with one bill. With the AT&T name, it seemed like a plan that couldn't miss. Except the plan was never implemented, and the company has since foundered. The fund sold AT&T several months after buying it.

Another misstep was the handling of Microsoft Corp. at the start of 1999. The company, with its secure position in the PC-software and computer operating-system markets, had been a company holding for several years. But the growth potential for Windows software was unclear, and the company was attempting to dominate the Internet software market in the same way.

Yeager and his associates were doubtful Microsoft could pull off the Internet play. It turns out they were right, but a year too soon. They ended up selling Microsoft in January 1999, only to see its share value soar before crashing along with other techs in the next year. That one move alone, Yeager says, caused customers-and assets-to walk out the door.

Some of the industry sectors not represented in the company's holdings are also notable. Totally absent, for example, are any companies in the telecommunications industry, including the fast-growing cellular-telephone business.

Yeager says the fund is closely watching the industry but has not yet found a company that has risen out from the crowd as a clear leader. "We haven't reached a comfort level with any of them yet," he says.

Likewise, the fund continues to observe the technology sector, as well as media giants such as AOL Time Warner, which also is on the fund's watch list. "We don't see the moat around them yet," he says. "They're part of our universe but not our portfolio."

As for the high-average P/E ratio of his fund's holdings, Yeager shifts the focus to growth. The fund, he says, has a P/E that's 1.2 times the S&P 500, but the firm's projected growth rate for its holdings are 2.7 times those of the S&P 500. He admits projected growth rates are based partly on faith, but that doesn't seem to be in short supply in Yeager's case.

The financial history aficionado says he sees the current economy as a reflection of the "golden age" of American industrialization in the late 19th century. The common threads between then and now, he says, are the opening of world markets and low inflation. The current slowdown, he says, is normal. "This is just a blip," he says.