Traveling man.

• Position: Jim Green's work as a stock broker

Jim Green's idea of a good time is to jump into his 1986 Oldsmobile station wagon and head for one of the Carolinas' bigger cities, where he can spend the day visiting executives of public companies.

If it's Greensboro, Green might see Unifi, Oakwood Homes and Guilford Mills. A drive to Greenville-Spartanburg prompts stops at TW Services and Synalloy.

As long as his butt and back can handle it, Green keeps driving, piling up about 40,000 miles a year, making more than 100 visits. But if it's more than a day's drive, Green doesn't make the trip. That's the basic philosophy underlying O'Herron & Co., the Raleigh money-management firm formed in 1984 by Green and Ken O'Herron.

"I'm interested in companies that are a car ride away," he says, explaining why he omits Tennessee from his universe, "and Memphis would be a very long drive."

Everybody in the world of money needs an angle to set themselves apart from the 14,000 other investment managers in the nation. And specializing in stocks of Carolinas, Georgia and Virginia companies makes sense because of the region's relatively robust economy.

But it hasn't worked out as Green and O'Herron expected. Over the past five years, through Feb. 28, their accounts showed an average annualized return of 9 percent, well below the Dow Jones Industrial Average (19.4 percent) and Standard & Poor's 500 (16.9 percent), including reinvested dividends.

Green thinks that O'Herron & Co.'s puny performance is partly due to the overall weakness of small stocks during much of that period. The NASDAQ Composite of over-the-counter securities, which contains many smaller stocks, also lagged the other two indexes an average 8.5 percent annual return, not including reinvested dividends. Small stocks have been an abandoned area for many years, Green says. "It's sort of been like basketball, where for a while they wouldn't let us play."

Early last year, their less-than-stellar performance prompted Green, 52, and O'Herron, 41, to take stock of their strategy. They paid particular attention to their 10 worst investments. (Among the big losers were some S&Ls, Microwave Laboratories of Raleigh and Phoenix Medical Technology of Andrews, S.C.) Their worst losses occurred in companies that were highly leveraged or very small or both. The discovery led them to two new restrictions: To be considered for purchase, a company must have sales of at least $100 million or market capitalization of $50 million, and nonfinancial companies...