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Northwest Specialty fund tops class of tech survivors

What are we looking for?

After the Nasdaq Stock Market cratered in 2000, the once-frothy technology sector sank into a bear market. Let's see how tech-fund survivors have since fared.

The screen

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We looked at the returns for science and technology equity funds for the 10 years ended April 30. U.S. dollar and duplicate versions of the funds were excluded.

What did we find?

Northwest Specialty Innovations sitting above the crowd with an annualized 6.8-per-cent return.

It has both outpaced its peers by a wide margin and strongly contrasted with the 1.7 per cent loss by the tech-laden Nasdaq composite index in Canadian dollars.

Northwest Specialty Innovations has managed to outperform partly because it doesn't have some of the handcuffs that others may have. Manager Robert McWhirter has a broad universe because he invests not only in tech companies, but also firms using technology to get a competitive advantage.

Over the decade, the fund has been 75-per-cent invested in Canada and the rest in the United States. "This is a North American fund with an emphasis on specialty innovation so you will see oil and gas service stocks [such as GasFrac Energy Services Inc.] which use a huge amount of technology," says Mr. McWhirter, president of Selective Asset Management Inc.

Mr. McWhirter, who uses quantitative analysis to choose stocks and turns over his portfolio three to four times a year, can hold lots of cash if he is cautious. "During times of storm clouds, we have held up to 60 per cent cash," he recalled, referring to the 2008-09 global financial crisis.

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He can also invest in companies of any market value. He has bought stocks of early-stage companies like BioxExx Specialty Proteins Ltd., "which is working to produce protein from canola." And he now owns shares of more mature firms such as wireless communications company Research In Motion Ltd., which he repurchased more recently.

Mr. McWhirter is now more bullish on tech stocks, which in many cases have moved sideways for most of the past decade. "Ten years in the desert have made tech stocks reasonably priced," he said, while these companies are also benefiting from the falling U.S. dollar because it provides them with opportunities to sell into foreign markets.

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