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Number Cruncher

Growth manager bullish on U.S. market Add to ...

What are we looking for?

What money managers are buying.

This is our second look this week at holdings in investment funds. Today, we check out the top stocks in Horizons AlphaPro North American Growth exchange-traded fund. The list is reported monthly at hapetfs.com.

More about the fund

The $12-million actively managed ETF has been run by Stephen Rogers of JovInvestment Management Inc. since early 2010. The fund, which is now invested mainly in U.S. stocks, gained 21.5 per cent for the year ended Feb. 28 versus 13.4 per cent for the S&P 500 Total Return Index in Canadian dollars.

Mr. Rogers, who looks for growth stocks (companies with higher-than average profitability, revenue and cash flow), is bullish on the U.S. market despite potential headwinds from Japan's earthquake disrupting supply lines, rising oil prices slowing global growth, and more euro-zone debt woes, which sparked a selloff a year ago.

Looking beyond events, the fundamental trend in the U.S. market is "pretty solidly up" because of increased spending from the corporate side with industrial production and capital expenditure numbers now in boom territory, he said. "Employment now looks like it is getting a solid footing."

What did we find?

Nasdaq-listed stocks gaining 8 per cent to 76 per cent over one year, and a loss for NYSE-listed apparel marketer and retailer Guess Inc., which recently lowered profit guidance.

Apple Inc., which makes personal computers along with its popular iPod, iPhone and iPad devices, gained 51 per cent over one year, but the stock still has potential, said Mr. Rogers. Apple trades at an "attractive multiple of roughly 13 times forward earnings, and yet the growth rate from Apple is at least double that of the market," he said. "It has a solid balance sheet with no debt and $60- to $70-billion (U.S.) in cash. If you strip out the cash, Apple has a P/E more like 11 times forward earnings."

Apple could also become a "big player" in mobile commerce when it adds "near-field communication" - wireless data transfer over short distances - to its devices such as the iPhone, he said. By tying the technology with iTunes accounts, consumers could make purchases by swiping their phone over a payment terminal. Apple shares could reach $400- to $450-a-share in 12 months, he suggested.

There is also more upside in Alexion Pharmaceutical Inc., a biotech company that is focused on drugs for diseases related to blood and kidney disorders, he said. The key drug, Soliris, has helped the company maintain "strong growth in sales and earnings at about 40 per cent a year," he said. His 12-month target is about $130 a share.

Mr. Rogers also likes e-commerce giant Amazon.com Inc. because it continues to win market share from online and bricks-and-mortar competitors. Its Amazon Web Services is a big player in cloud computing services - renting server space on demand over the Internet to companies - while it also has launched a mobile app business for Android phones and tablets, he said. "That could be nice surprises to their revenue stream over the next couple of years." His one-year target is $230 a share.

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