Richard P. Carney is an affable California money manager who specializes in finding small companies that have interesting business niches, steadily growing profits and stocks with bright futures.

That sounds like the kind of stocks every investor looks for and rarely finds. But Carney is likely to have better success than most investors. He's been working at his trade for about 25 years.

When Carney unearths one of those tempting companies, he buys a bunch of its shares for a small Washington fund he manages called the Special Growth Portfolio of the GIT Equity Trust.

The initials "GIT" will be familiar to many Washingtonians. They stand for Government Investors Trust, the name of a money market fund that made its debut here in 1979, during the days of high interest rates.

Since then, Government Investors Trust, headed by President A. Bruce Cleveland, has grown into a family of funds. Cleveland, a Harvard MBA, worked in the corporate finance department of Drexel Burnham Lambert and later at the Small Business Administration before starting his own investment company.

GIT's offices are in one of those Rosslyn high-rises that seem to multiply faster than penny stock brokers.

The GIT Equity Trust has three portfolios. Equity Income, which stresses dividends, rose 25.87 percent in 1985. Select Growth, which emphasizes both capital appreciation and dividend income, was up 32.68 percent. Both are managed by Executive Vice President Thomas C. Miller in Rosslyn.

The third, the Special Growth Portfolio, is managed from Los Angeles by Carney, who is a partner in the firm of Cramblit & Carney. The firm manages $450 million in institutional monies.

The Special Growth Portfolio invests in small companies that offer potential for rapid growth and maximum capital appreciation. The fund is designed for investors who are willing to assume above-average risk.

The Equity Trust portfolios charge no commission and have no redemption fees. The management fee for Special Growth is 0.75 percent. The minimum investment is $1,000 ($500 for IRA accounts).

After a basically flat year in 1984, Carney had a good year in 1985, watching the Special Growth Portfolio move up 47.18 percent, according to the rankings of Lipper Analytical Services. That made it the nation's 20th most successful fund.

If you don't count the high-flying international and global funds, Special Growth wound up in eighth place.

By comparison, the Standard & Poor's 500 was up 31.79 percent in 1985. (All mutual fund percentages are figured with dividends reinvested.)

Special Growth, which started in July 1983, recently began to appear in the mutual fund listings of the financial pages after it crossed the 1,000-shareholder mark. The fund now has $12 million invested in about 30 stocks.

Carney said his five favorite holdings are:

*Jaguar ADR (JAGRY $7), the British motor-car firm. Carney said he believes that new models and improved quality will help the firm's earnings to grow at a 15 percent annual rate.

*Data Card (DATC $25), a firm that is likely to benefit from the expanded use of "smart cards," credit cards with embedded computer chips that will help prevent theft and permit more detailed credit controls.

*Orbit Instruments (ORBT $12), which makes electronic systems for the U.S. Navy and will benefit by the Navy's fleet expansion and modernization program.

*Seven Oaks International (QPON $20) the nation's second-largest processor of "cents-off" coupons. The firm collects the coupons from food stores for a fee and presents the coupons to manufacturers for payment.

*American List (ALST $13), which compiles computerized lists of high school seniors that are rented to colleges, the military services, record clubs and others. The company is expanding into lists of college students.

How does Carney find these niche companies?

"The first thing I look for is the balance sheet," said Carney. "Financial strength and high return on equity are very important to me. Our typical company probably returns between 20 percent and 25 percent on its equity, and this compares with the average rate of about 12 percent to 13 percent."

Carney says he likes to see cash on the balance sheet instead of debt. And he doesn't like to pay too much for the stock. "If you pay a really high PE [price earnings ratio] for something unique, you can't afford to have anything go wrong."

As a group, the stocks in his portfolio are generally in line with the market PEs, he noted. The PE for the S&P 500 currently is about 16.

Like many investment pros, Carney sometimes uses a seat-of-the-pants approach to picking stocks. For instance, he was impressed with WD-40 Co., which makes the lubricant of the same name. A consumer might not buy more than one can a year, Carney said, but it wouldn't matter if the price were a dollar more or a dollar less. A squeaky wheel will get the grease, regardless of cost.

That feeling gives WD-40 "pricing flexibility," and can give the company strong financial numbers, Carney says. When he runs into a product with that kind of market niche and pricing status, he thinks about investing. He now owns 12,000 shares of WD-40.

Being a good stock picker, Carney notes, doesn't mean you always are going to have winners.

"In anything like this, you are going to have superwinners, you're going to have winners, you're going to have average performers, you're going to have losers. The question is, 'What are you going to do about it?' "

"The fact is," Carney continues, "that when I went into those stocks, I thought they all could be superwinners. But, on the losers, you have to go back and say, has this company done operationally what I expected? Typically, in a stock that is underperforming, the answer is no. Something has deteriorated or gone wrong. And the best thing you can do is get rid of it . . . and try again."

Even winning stocks can present problems for a portfolio manager.

If Carney has a stock that has done very well, he then has to decide whether to sell it. If the company is performing well, he says, he may trim back on his holdings, but probably won't sell the entire block unless the price gets out of sight.

As a professional, Carney runs his money inversely with the movement of the market. A year ago, the Special Growth portfolio held 2 percent of its money in cash. As the market moved up, Carney has shifted his position so that today, he has a 20 percent cash position.

The market, he believes, is "getting somewhat ahead of itself," and he thinks there is more speculative fever than there was a year or two ago. "We're seeing a lot of new offerings in the stock market being gobbled up and pushed to premiums, and it certainly appears to me to be a period where the emphasis is more on greed than fear," Carney concludes.

Two Richmond thrifts, Investors Savings and Loan and Citizens Savings and Loan, have agreed to raise the price for their merger. The companies announced last December that Investors would pay $15.50 in cash for each of the 1.1 million shares of Citizens stock, for a total of about $17.2 million. Now Investors officials have raised the price to $18.25 a share, or about $20.3 million. The reason: Falling interest rates and improved earnings at Citizens have made their stock worth more. The companies hope to complete the merger by July. The merger would give Investors Savings and Loan assets of $1.3 billion and 35 offices in Virginia.

"Better Investing," the magazine of the National Association of Investors Corp., has ranked the 100 most popular stocks held by NAIC investment clubs around the nation. AT&T ranks first, IBM second, Wendy's International third, American Home Products Corp. fourth, and Baxter Travenol Labs fifth.

Primark Corp. of McLean, a diversified energy and financial services holding company, is 91st on the list. On the NAIC's "second 100" list, Hechinger Co. of Landover ranks 101st, Black & Decker Corp. of Baltimore 153rd, and James River Corp. of Richmond 179th.