Jonathan Faison is a language professor by day but on weekends and evenings, he is an investment blogger and a stock-picker par excellence. His nearly 300 trades since early 2011 were profitable 65 per cent of the time and gained an average 28 per cent in the year following purchase, according to TipRanks.com. This places him 17th out of the 6,350 financial bloggers monitored by TipRanks.com (as of Jan. 19, 2018).
We asked Mr. Faison how he does it.
How would you describe your investment approach?
Simply stated, I invest in stocks that could go up significantly within the next 12 months. These Runners of the Year [ROTY] stocks, as I call them, tend to come from the biotechnology and technology sectors. But I'll look at other sectors as well. My approach could be called 'event-driven.' I look for key events coming up that could substantially boost the stock price of a company.
An example is a biotechnology company that is developing a drug where testing to date has been encouraging and results for another study are coming out in six months. Another is an under-the-radar tech firm launching a new product into a red-hot sector – and word-of-mouth reviews on the product have been positive.
I don't have a technical background in the biotech or tech industries. But I have been fortunate enough to get to know a few institutional investors and analysts who I can reach out to, at times, for a second opinion.
I also focus on risk-management strategies. This means doing things like cutting my losses quickly and choosing the proper position size for trades [such as not taking too big or small a position relative to the portfolio size and/or the riskiness of a stock].
Can you talk about some of your current holdings?
My account holds just 10 positions. I have a few winners that I'm letting run higher. One is Global Blood Therapeutics, which is up 150 per cent since I recommended it in a 2016 article on seekingalpha.com.
Global Blood Therapeutics is developing a drug to treat sickle cell disease. There are early indications that the drug will be approved by the [U.S.] Food and Drug Administration [FDA].
Another winner that I am still holding is GlycoMimetics. Its stock is up more than 75 per cent since I wrote about it in August, with more appreciation expected.
Both are candidates for takeovers by larger pharmaceutical companies. And institutional investors are increasing their ownership stakes, and buying up new issues. Moreover, the drugs under development have the potential to be approved for the treatment of more than one condition.
Can you tell us about some recent stock picks?
My most recent idea is Zealand Pharmaceuticals, a leader in the treatment of gastrointestinal and metabolic diseases. It did an IPO [initial public offering] in August and the stock price is down, even though Zealand is partnered with pharma giant Sanofi.
Sanofi will market their combined-drug insulin pen and pay Zealand royalties of more than 10 per cent on sales in a market estimated at several billion [U.S.] dollars. Zealand also has other drug candidates, including one for treating severe hypoglycemia.
Another recent idea is GW Pharmaceuticals. Their lead cannabinoid product, Epidiolex, is a potential blockbuster with regulatory filings expected by the end of the year for the indications of Lennox-Gastaut syndrome [a pediatric epilepsy syndrome] and Dravet syndrome [a severe epilepsy suffered by infants].
This interview has been edited and condensed; includes material from Mr. Faison's articles on seekingalpha.com.