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John O’Connell.Tibor Kolley/The Globe and Mail

John O'Connell is chairman and CEO of Davis Rea. His focus is North American large caps.

Top Picks:

Cisco Systems (CSCO.O)

Kelt Exploration (KEL.TO)

Spartan Energy (SPE.TO)

Past Picks: June 30, 2014

Google (GOOGL.O)

Then: $584.67; Now: $542.16; -7.27%; Total Return: -7.27%

IBM (IBM.N)

Then: $181.27; Now: $165.68; -8.60%; Total Return: -6.07%

Spartan Energy (SPE.V)

Then: $4.03; Now: $3.16; -21.59%; Total Return: -21.59%

Total Return Average: -11.64%

Market outlook:

Equity markets are continuing to digest the prospect of Federal reserve interest rate hikes, the effects of a strong U.S. dollar on U.S. corporate profits and sluggish global growth. While many are focused on the prospect of rising rates we remain convinced that while American growth is firming it is still very tepid in view of the big boost that was expected from lower energy prices. Investors have continuously overestimated economic growth and concerns of rising rates and we think they are doing it again. Equities continue to look fairly valued and only strong value can be found in limited areas where most investors fear to tread. Notably, energy prices continue to firm and energy equities are amongst the best performers this year in a difficult tape for all equities. Pessimism toward energy continues to be at high levels in spite of the data pointing toward improving macro fundamentals. Technology should continue to be a fundamental area interest as well as global growth reaccelerates and business continues to invest to remain competitive.

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