Tiny isn't small enough for the folks at

Bjurman & Associates

. They think the biggest opportunities can be found in the littlest places, so they limit their investing in only retail mutual fund to the really small stocks.

That hasn't stopped their fund from registering some nice-size returns, though -- especially when compared with the performance of others in the micro-cap arena. Since its inception in March 1997, Bjurman Micro-Cap Growth has returned 25.5%, well above the category average gain of 13.5%. It ranks fifth among 38 funds in its category, according to

Lipper

.

No, Bjurman isn't a household name -- but it's far from unknown in the business. The Los Angeles firm, which has been overseeing money for corporations, pensions and high-net-worth investors for nearly three decades, has more than $1.5 billion under management.

It defines micro-caps as companies with a market value of between $30 million and $300 million.

"These companies are going to grow in earnings, and the stock price is going to go with them," says Thomas Barry, top manager of the fund and Bjurman's chief investment officer. "We manage small-, mid- and large-cap accounts, but the micro-cap sector has the fastest growing companies generally."

To find the best of the smallest, Barry and his team use five computer models to screen some 1,500 companies. The models focus on earnings growth, secondarily on valuation. "We believe earnings growth is a primary reason why anyone buys stocks. So if a company reports solid earnings growth for a good period of time, you're bound to make money off of it, regardless of the crazy volatility of the stock market," says Barry.

The average earnings growth for companies in the portfolio for the past year has been just under 60% --- compared with about 11% to 12% for the

Russell 2000

small-cap stock index. "So you can see why the mutual fund has done so well -- we've just got companies that have phenomenal earnings growth rates in there," he says.

What is especially exciting in the portfolio?

Barry singles out

InterVoice

(INTV)

, which develops, sells and services interactive voice response systems, allowing users to access computer databases using a touchtone telephone. "The earnings growth for InterVoice this year is supposed to be 262%," says Barry.

Another favorite is

TranSwitch

(TXCC)

, designers and developers of semiconductor solutions, mainly for the telecom market. "It's a company that is relatively new and is just growing as fast as any out there. It's the very rapid earnings growth of this company that makes it attractive."

Chattem

(CHTT)

also is on Barry's A list. That company makes branded over-the-counter pharmaceuticals. "Just great steady earnings growth for this company. Yeah, a rough couple of weeks, some volatility in the past, but its long-term earnings growth is still intact," he says.

They may beat the balance sheets tirelessly, but Barry and his assistants don't do much tire-kicking -- rarely, if ever, meeting with management. "I want to be as nimble in making changes to this portfolio as possible. Often, management isn't gonna tell you anything anybody doesn't already know, and falling in love with a story or company is very damaging sometimes to performance." Plus, he adds, "I don't even want company managers to know we're thinking about buying a stock because they can inflate the story -- they're salesmen."

And if the story and stock are inflated past the billion-dollar market-cap mark? Barry is quick to sell. "Then they don't really have much reason to be in a micro-cap portfolio," says Barry. "The problem with most mutual funds is that when you buy a small-cap portfolio, you're really buying a large-cap growth fund. We want to keep this micro-cap. There's the disadvantage in that you get rid of some of your biggest winners -- but you find more big winners."

"Continue to find good ideas and once they start to get discovered by the institutional side, get out of them," he advises.

Easier said than done, of course.

Bjurman's median market cap is $289 million, which does not fit

Morningstar's

micro-cap definition, which places the median market cap ceiling at $250 million. But Barry says he still tries to stick with small stocks as they have the advantage of flying under the radar of the major institutions.

That doesn't preclude fund volatility, however. According to Morningstar, the fund rocketed 21% in the second quarter of 1997, zoomed another 35% in the following quarter, then lost 9% the last quarter of 1997. It was up again 14% in last year's first quarter, tacked on 2% in the second quarter, plunged 23% in the third quarter, and shot up again 25% in the last quarter of the year.

Barry, who has the bulk of his IRA in his fund, says investors who are waiting for a three-year track record are going to miss out. Bjurman Micro-Cap, now with just over $10 million in assets, is scheduled to close when it reaches $250 million.

"This fund is not a core fund for anybody," says Barry. "This is an area they should diversify into mainly because it's most likely to give them the greatest returns over the next 10 years."

Brenda Buttner's column, Under the Hood, appears every Thursday. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks or funds.