His life is a pilgrimage; Frank Baxter melds markets and mantra in running Jefferies & Co.

When Frank E. Baxter isn't busy running Jefferies & Co., a Los Angeles brokerage firm which saw its stock price nearly double in 1992, he might be found in a transcendental pose offering words of wisdom.

"I enjoy writing, turning a phrase," says the 56-year-old chairman and CEO, twisting in his green swivel chair away from a computer screen filled with quotations and aphorisms he often finds in the newspaper. The newest addition: "Life is a pilgrimage from appearance to reality."

But Baxter doesn't just keep philosophical nuggets on computer file. He keeps track of the company's stock (up from $11.25 per share in late 1991 to a current $23 per share); the company's high-yield underwritings (estimated $1.2 billion last year); earnings (up 90 percent in 1992 from the previous year); earnings per share (nearly doubled from $1.57 for year-end 1991 compared to $3.08 in 1992); and employees (506).

Often traveling among the firm's nine offices, including Hong Kong and London, Baxter can plug in his computer anywhere and instantly track all securities bought and sold by his traders and every deal they are currently working on.

Not bad for a fellow born in a stage-coach stop, a tiny sagebrush dot of a town between Reno and Sacramento. Called Baxter's Stop, the town was founded by his great-grandfather.

Since taking the reins five years ago at Jefferies, the low-key, white-haired Baxter, known among fellow co-workers as the "puncture-proof trial balloon," has very carefully driven the battered company out of some rough terrain.

Almost fatally damaged by scandal and the market crash in 1987, Jefferies, under Baxter's direction, has managed to do something its high-flying Beverly Hills neighbor, Drexel Burnham Lambert, Inc. could not -- survive and prosper into the 1990s.

Founded in 1962 by the flamboyant Boyd Jefferies, the company has its roots in the third market, where nonexchange-member brokerage firms can trade over-the-counter in exchange-listed securities at all hours of the day. Jefferies became famous for "sweeps" which delivered huge blocks of companies into the arms of takeover artists.

Crisis struck in 1987 when Boyd Jefferies was convicted by the Securities and Exchange Commission of parking stock for Ivan Boesky, and banned from the securities industry for five years. Baxter, who joined the firm in 1974 as an institutional salesman and who was by that time president and chief operating officer, took over. Despite many in the industry who wanted to paint the firm with the same brazen brush as Drexel, Baxter says he never had a single doubt about the company's survival after its founder left. He says the most difficult obstacle during that time was "having people question not only our ethics but our ability."

Now, local investment bankers have little doubt of Baxter's ability. Although low-key -- asked what type of suit he's wearing, the 6-foot-1-inch Baxter shrugs and says it could be from Sears -- this CEO is described as "tough, hands-on, aggressive and bright" by Los Angeles bankers. Baxter's Jefferies is known as a "worthy competitor," even among the New York-based mega-brokerage houses.

"It's good to have a firm located in Los Angeles the stature of Jefferies," said a Los Angeles banker with a major New York firm. "Other local firms like Seidler (Amdec Securities) and Wedbush (Morgan Securities) are all the B-leagues."

Baxter said he is a strong believer in not just accepting the hand that's dealt, but embracing it.

"We will always take advantage of conditions," says Baxter. "In 1987, we not only had the scandal of Boyd leaving, we had the (stock market) crash, and then there was a real depression in the brokerage industry really until 1990, but we managed to have profits in all of those years."

Although the company's focus is now global, Baxter says the banking opportunities in Los Angeles will be tremendous once the region recovers from the recession.

"There's so much energy that will need financing in Los Angeles," he says, looking out of a window in his 11th floor Westwood office. "There is so much business within 25 miles of here, we'd never have to get on another plane."

Until that day, Baxter spends an average of two weeks a month on the road. When he is in town, he likes to sit on the trading floor, with two televisions going and a wall of clocks showing time zones throughout the world. His office has glass walls, so when he is not in the thick of things he can keep an eye on traders. This is a CEO who says he calls each of Jefferies' 506 employees on their birthdays.

His desk is cluttered with papers and mementos, and he can't find the cassette with the Jefferies' company song. Photos of his three grandchildren, Vanessa, Nicholas and Theresa, are prominently displayed, as is a realistic-looking hand grenade, which detaches from a wooden platform bearing the words: Emergency Only for Bear Markets.

To handle the stress inherent in his job, Baxter exercises and uses transcendental meditation, in which a mantra is chanted in order to foster calmness and spiritual well-being, for 20 minutes twice a day.

In addition, Baxter also practices a form of Indian medicine called Ayurvedic.

A marathon runner, Baxter says he runs at 3:30 a.m. near his home in Pacific Palisades, where he can see the ocean. It drives the local Pacific Palisades security people crazy, he says.

Baxter says although he has participated in the New York, London, Los Angeles and Boston marathons, his favorite was London, because the "crowds cheer you on with 'Well done, mate,' right from the start." Baxter, who says one of his strengths is durability, is also a skier and an opera buff.

When asked why the interest in quotations and the elaborate computer files, Baxter replies: "I don't think there are any new thoughts. I think most of the good thoughts have been thought, they are just thought differently."

Baxter's father was an accountant and his mother a homemaker. He graduated from the University of California at Berkeley with a B.A. in economics in 1961. The following year he married Katherine, with whom he has three children, Stacey, Matthew and Katherine. While all of the children worked stints at Jefferies, none of them followed their father into the securities business. Instead, two are teachers and one is a musician.

In 1963 Baxter joined J.S. Strauss & Co. in San Francisco, then a major third market firm. In 1974, he signed on with Jefferies as a salesman.

Mark A. Wolfson, an associate dean with the Stanford University Business School who sits on the Jefferies board, calls Baxter an "absolute gem."

"He's got the ability to identify people who can add value to a firm and let them run with things, but still know what they are up to so they don't expose the organization to any risk," says Wolfson.

Several analysts who follow Jefferies' booming stock cited Baxter's leadership as one of the company's strengths.

"I think he is a very interesting individual. He is very human in nature," says Perrin Long, an analyst with First Michigan. "Outwardly he gives a calm appearance, people like him and want to work hard for him."

Analyst Philo Smith of Philo Smith & Co., Inc, in Stamford, Conn., calls Baxter "top flight" and says he "works hard," noting Baxter's stake in the company. He owns 400,000 shares out of 4 million shares, or an estimated $9 million of the company's stock.

The praise is forthcoming, but not the criticism.

Weaknesses? Baxter laughs but won't answer when asked what his weaknesses are, explaining, "he who speaks does not know, he who knows does not speak."

Now considered by analysts both well-positioned and well-capitalized, Jefferies is expected to open new offices in New Orleans and Houston this year; it just hired several energy specialists.

Baxter also has ambitious plans to underwrite more offerings and design a security for public or private pension plans to invest in small or medium-sized companies.

"We want to be able to underwrite any security for a small to medium client," says Baxter, who adds that Jefferies has relationships with more than 1,600 institutions and 6,000 corporations.

"Our relationships are our capital," says Baxter. "Money capital is easy get. But to have that kind of trust is something that can't be replicated."

The company, long an expert in proprietary technological software -- most notably its Posit system, which trades 3.5 million shares a day -- is pushing into various opportunities overseas. Baxter says the company is just getting Global Posit off the ground.

"We expect it has more potential than U.S. Posit, because the liquidity problems are worse there" in Europe, he says.

Baxter also sees opportunities in international equity trading and trading international convertibles. He moved the company into convertible bonds and international securities several years ago.

Probably one of the more controversial of Baxter's actions since becoming CEO was his hiring of 25 former Drexel professionals, including Jess Ravich, to lead a high yield division. While now one of the most profitable divisions in the industry, many local securities professionals still consider it "a mini-Drexel."

"Frank was probably right in getting them," says one local banker. "People just like to take potshots. I wish we had hired them."

One local banker who did not wish to be named says there are still two camps of people in Los Angeles, pro and anti Drexel.

"I think there are people in this town that didn't like Drexel, the reputation, the arrogance. This camp of people won't use Jefferies," he says. "Some of the characteristics of the old Drexel are still used over there, arrogance, obnoxiousness."

Baxter disagrees with that theory but agrees that hiring the Drexel employees "had some risk." He says he cherry-picked, looking for people with character.

Baxter's big job for 1993 will be finding a way to take advantage of the company's ever-expanding divisions in the constantly changing world of high finance.

"We have these very profitable businesses right now, but they will only realize most of their potential by learning how to be more integrated," says Baxter. "We need to take our whole team and sort of huddle up and say what play are we going to do today. A five year plan is out of date about 30 seconds after it's been written. So response is everything."

When asked about the future, he responds in typical Baxter style: "I think everything in life is a journey. I think we're always going; there is no end."

SNAPSHOT

Frank E. Baxter

Native of: Baxter's Stop, Calif.

Age: 56

Current residence: Pacific Palisades

Education: B.A. in economics from University of California at Berkeley