WADDELL & REED'S ADVISOR VANGUARD FUND

Take Waddell & Reed's Advisor Vanguard Fund, (1-800-366-5465), or instance. Ever since Dan Becker took over as the fund's portfolio manager in July 1997, its total return has moved upward each year. As of August 7, its 15.43 percent year-to-date total return placed it in the top eight percent of all funds in Morningstar's "large growth" category.

With around $3 billion in assets, Becker keeps only a few dozen stocks in the fund's portfolio--- mostly large-cap ones. Currently, largest sectors include health care and retail stocks. What follows is more on his investment style:

Q. When you took over the fund on July 1, 1997, there were over 80 stocks in the portfolio and you've whittled that down considerably.

Becker: The day a person gets a fund, it's full of other people's stocks. So it takes a while to get your stocks in there and the other one's out. At first there were about 80 names and I got it down to 50. Then in 1998, got it to 40 and it has varied between 40 and 55 stocks as long as I've managed the fund.

Q: In a nutshell, tell me about your investment philosophy and strategy.

Becker: I try to focus on a very few companies looking for those that have something called a "sustainable competitive advantage." That is simply some characteristic that allows a company to do something that no one else can do.

Harley-Davidson, for example, has one of the best brand names in America. Coca-Cola has a great brand name, Intel has huge economies of scale, and Microsoft has huge switching costs. These are all barriers to entry making it difficult for your competition to get into your business.

Q: What about the dot.com companies. How do they fit in?

Becker: What we've learned over the past couple of years is that there were a lot of neat ideas in the Internet e-commerce space---whether it is selling books, vacations, car rentals, golf clubs and sports equipment---but there was nothing to prohibit other people from replicating a good idea and good web site. Meaning that, if I'm Barnes and Noble or Borders and have this great web site, there is nothing to prohibit Amazon.com from coming in and stealing my business. So, there is nothing in the Internet e-commerce space to prohibit competition. And without a competitive advantage, you have no way of making money long term.

Now if you could have a patent on a web site, which you can't have, that web site could be a gold mine. But it's not like Pfizer. When they create a new drug like Viagra, it is patented for 17 years and they can gauge their customers for a lot of years to come. That's my idea of how to make money long-term.

Q: But the Internet and technology is a big part of your fund.

Becker: Again, I gravitate towards the companies that have the barriers to entry and have a sustainable competitive edge. Sun and Oracle and Cisco and EMC, have proprietary solutions to get people up and running on the Internet. EMC is my largest holding. My cost is $6 and the stock is $90.

The best way to explain it is like this; If there is a war out there, the way to make money in a war is to buy the guy who makes the bullets. That's because you don't know who is going to win the war but you know that there will be a lot of bullets shot. Companies like Cisco, EMC, and Oracle make the bullets of the Internet war and they have huge competitive advantages.

Q: How about something that didn't work out for you?

Becker: Citrix systems based in Ft. Lauderdale. It's a software company I thought was going to do well and it just didn't work out. I bought it at $40; it went to $120; and I wound up selling it at $25.

Q: For whom would you say the fund is best suited?

Becker: People probably between the ages of 20 to 50 who have a need for capital appreciation and who don't want to take excessive risk.