It is no secret that the secret to making money in the stock market is to find a company that -- in the language of the experts -- is undervalued. Simply put, it means that the company's stock is selling for less than the company and its stock are worth. Experience has shown that investments in undervalued companies often produce extraordinary gains over a period of time.

The highest accolades in the investment business go to the people who are able to find stocks that are undervalued and have good potential for growth. It is a skill that many pursue but few achieve with any consistency.

One man who seems to have reached that select circle is Marshall B. Wishnack, the president of Wheat, First Securities Inc. of Richmond. Until he was named president of the firm about a year ago, Wishnack was the research director of Wheat, First. In late 1976, he began overseeing the "Monitored Portfolio," a hypothetical portfolio that included many undervalued and high-growth stocks of firms located in the southeastern region of the U.S -- and especially in Virginia and North Carolina.

The portfolio, though hypothetical, has been a serious endeavor based on the efforts of Wheat, First's research staff. Indeed, many of the multimillion-dollar accounts managed by Wheat, First brokers mirror the investments contained in the portfolio.

Wishnack, a 38-year-old Chicago native with an MBA from Columbia University, said that, until he became president of Wheat, First, he was responsible for making most of the portfolio's investment decisions.

During the eight years of its operation, the portfolio has enjoyed steady growth, with only two major downturns during 1980-'81 and 1983-'84.

The latest figures show that as of March 29, $100,0000 invested in the fund at its inception on Dec. 31, 1976, would have grown to $552,792, an increase of 452.79 percent. By comparison, the companies on Standard & Poor's 500-stock composite index rose 68.12 percent during the same period, and the 30 firms that make up the Dow Jones Industrial Average went up 26.09 percent. Dividends and commissions were not included.

On an annualized basis, the Wheat, First portfolio's compound return was 23.03 percent, compared with 6.5 percent for the S&P 500 and only 2.85 percent for the Dow Jones index.

Current stocks in the portfolio include Dominion Bankshares, Figgie International, Atlantic Research, Ryland Group, Circuit City, Sovran Bank, CSX Corp. and Piedmont Aviation.

Over the past several years, Wishnack said, Wheat, First has received many requests from investors seeking to invest in the hypothetical portfolio. Finally, Wishnack said, the firm responded by designing the Southeastern Growth Fund.

Two theories underlie the Southeast fund. The first is that the Southeast is an investment area superior to the rest of the country (although not necessarily superior to other specific regions).

Wheat, First backs up this assumption with solid figures. For instance, between 1970 and 1980, Wheat, First researchers say, population in the Southeast (defined as the District, Maryland, Delaware, West Virginia, Kentucky, Virginia, North Carolina, Tennessee, South Carolina, Georgia, Alabama, Mississippi and Florida) grew by 14.1 percent compared with 11.4 percent for the nation. For the same period, personal income grew by 45.7 percent in the Southeast, compared with 39.1 percent for the country. Wheat, First researchers offer similar figures for housing, manufacturing and other aspects of the economy.

For companies in the Southeast region, meanwhile, earnings per share grew by 8 percent in the five years from 1980 through 1984, while earnings for S&P 500 companies grew by only 3.7 percent. The Southeast companies also were ahead of the S&P 500 on sales, return on equity and stock performance.

"The region," the prospectus noted, "has relatively low tax rates and favorable labor conditions, both of which have been leading to an influx of new industries including medical, high technology and computer software. In addition, numerous major corporations are continuing to relocate their headquarters into areas such as Northern Virginia's Dulles corridor and the Research Triangle in North Carolina."

Wishnack said Wheat, First researchers identified 365 companies in the region with capitalizations (the number of common and preferred shares and bonds, multiplied by the prices of those issues) of $30 million or more. These companies serve as the "universe" from which Wheat, First managers will select companies for the fund. They began with 30 stocks that the federal Securities and Exchange Commission prohibits them from identifying until the fund is in operation in a few weeks.

The second theory underlying the fund is that a regional brokerage firm -- such as Wheat, First -- that makes a careful study of companies in its territory has a good chance of being the first to spot undervalued companies.

The rules of the fund require it to invest at least 75 percent of its money in companies that are based in the Southeast or do most of their business in the region. That gives the fund the leeway to buy some stocks "outside" the region. But the managers say they plan to stay close to home.

"Our objective," said John S. Pickler, the research director at Wheat, First, "is to profit from the growth of the Southeast."

The managers of the fund also will have the option to switch up to 25 percent of their holdings to cash investments, if they don't like the way the market is going. The managers of the portfolio adopted a similar strategy about two years ago to give themselves more market-timing flexibility.

Although the portfolio has all but given birth to the fund, there will be differences between the strategies that have been used in running the portfolio and the strategies that will govern the fund. Pickler said the managers of the portfolio have used a "top down" approach while the fund managers will use a "bottom up" approach.

What does that mean?

The "bottom up" approach, Pickler said, is the one most investors are familiar with: the idea of finding undervalued and rapidly growing companies with good investment prospects and staying fully invested most of the time. In the "top down" approach, the portfolio managers not only look for good value, they also rely on market timing, moving to other investments and weighting their portfolio by industry.

After a three-week initial offering at $10 a share, minimum investment $1,000 ($250 for Individual Retirement Accounts), the fund closed last week with $18.5 million invested in 4,672 accounts.

The offering was timed to coincide with IRA season and succeeded in drawing many IRAs. In several weeks, the fund will reopen and the price of the shares, which fluctuate, will be determined by the net asset value of the fund. Wishnack expects the fund to grow initially toward the $40 million to $50 million mark.

While the fund charges no up-front commission, it will charge the investor a fee of 5 percent that will be reduced by one percentage point a year to 1 percent in the fifth year. After that there is no charge. The fund also includes a 0.07 percent management fee and a 1 percent annual distribution fee, related to the costs of marketing and advertising.

In creating the fund, which was no small endeavor, Wishnack has invested more than time and money. "The fund is now the flagship of Wheat, First Securities," he said, indicating that he has put the prestige of his firm on the line, as well.

"It's a big bet," he said. "I hope we're right. But so far I'm encouraged."