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Mutual Fund News


Special to The Globe and Mail


Occupation Investment professional.

The portfolio Shares in Targacept Inc. and a diversified mutual fund of smallcap companies.

The investor Daniel Ward bought his first stock in 2008. It promptly plunged by 40 per cent. Then he bought some biotechnology stocks. They recouped the loss within months - in the midst of a raging bear market.

Biotechs may be hit or miss, but this success led Mr. Ward to develop a specialization in the sector.

How he invests

Mr. Ward is focused specifically on small biotech companies. He likes their potential for higher returns and the "easy access to management to get a better understanding of company direction."

He sifts through the stratum that has sold off substantially due to some bad news, for example, a failed drug trial. The objective is to find the companies that still have good balance sheets, management and product pipelines.

They should also have institutional ownership and a catalyst for share appreciation, such as an impending ruling on a drug under development.

His major stock holding is Targacept, which is developing a drug that aids gastrointestinal motility. When purchased, the shares were in the doghouse because of failed trials for previous drugs under development.

Yet the company has more than $100-million (U.S.) in cash and just a smattering of short-term debt. More than half the shares are owned by institutional investors. And his discussions with management point to a catalyst: the possibility Targacept may expand its product pipeline through acquisitions.

Best move Mr. Ward regards doubling down on a dip in Alexza Pharmaceuticals Inc.'s stock in 2012 as his best move because it was "an example where I stuck with my thesis in adversity and was rewarded for it."

Worst move It was his first investment. The company had promising technology but also a lot of debt.

Advice Use the mosaic approach to investing, he says. This means collecting information from a variety of sources, including non-public channels such as talks with company personnel, suppliers and competitors.

Want to share your strategies? E-mail

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