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Raymond James' 10 top picks for 2012 Add to ...

Raymond James has issued its Best Picks list for 2012, giving investors a glimpse of 10 Canadian stocks that are tapped to provide the best returns over the next 12 months.

These sorts of lists seem to be growing increasingly popular among brokerages – Goldman Sachs has its Conviction List, for example – but it does put them out on a limb. In contrast to ubiquitous “buy” recommendations, these far-more selective lists have a can’t-miss quality to them. When they do miss, ouch.

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To the credit of Raymond James, it publishes its track record with the new picks. Over the long-term, going back to its debut 2003 list, their Best Picks have returned 18.5 per cent a year. That beats Raymond James’ preferred benchmark, the 266-member S&P/TSX Smallcap index, which has returned 11 per cent a year over the same period.

That said, the Best Picks didn’t live up to expectations last year, sliding 34.1 per cent. Daryl Swetlishoff, head of research, defends the list this way: “As the list is not intended to be a model portfolio necessarily held to maturity, we highlight the ‘high water’ return potential of the individual stocks over the period. Selling each security at its high point for the period would have produced an average high water return of 5.7 per cent vs. the Small Cap Index with a 0 per cent return.”

Another possible defense: The Best Picks returned 145.2 per cent in 2009.

The picks for 2012, along with a brief investment rationale: Domtar Corp. (the one hold-over from the 2011 list; relatively insensitive to macroeconomic conditions), Alamos Gold Inc. (a low-cost gold producer with an excellent growth profile), Bird Construction Inc. (a preferred oil sands contractor), Eldorado Gold Corp. (impressive production profile), Fortress Paper Ltd. (get ready for strong free-cash flow), Legacy Oil & Gas Inc. (recovering from a rough 2011), Lumina Copper Corp. (potential takeover candidate), Methanex Corp. (outlook for methanol is bright), Secure Energy Services Inc. (well-positioned facilities) and Shoppers Drug Mart Corp. (recent selloff has created a buying opportunity).

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