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John Zechner.Danny Yu

John Zechner is chairman and chief investment officer at J. Zechner Associates. His focus is North American large caps.

Top Picks:

Catamaran (CCT-TSX)

Catamaran provides pharmacy benefits management services and solutions to the health care industry, which has become a higher growth area in need of modernization with the roll-out of the Affordable Care Act in the U.S. Earnings beat expectations in the last four quarters despite having to put costs in place to grow both public and private exchanges. Valuation is below average versus historical levels and relative to the industry. Moreover, the company continues to make accretive acquisitions to supplement organic growth.

Detour Gold (DGC-TSX)

Expect that gold prices will move higher over next few years due to massive paper currency devaluations and continued record low levels of interest rates. Detour meets the criteria of strong, fully-funded production, some growth potential, reasonable valuation and very little sovereign political risk, given its base in Northern Ontario. Very high leverage to rising gold prices.

Torstar B (TS.B-TSX)

The stock is trading back down to where it was when the company made the surprisingly high value sale ($455-million) of Harlequin Enterprises to News Corp. The company is now in a strong net cash position while pension fund deficit has also been reduced. Digital division is growing, costs have been reduced in newspaper divisions and stock valuation is excessively low on earnings and cash flow while the dividend yield is over 8 per cent and easily funded. Toronto Star also has brand value.

Past Picks: March 17, 2014

Capstone Mining (CS-TSX)

Then: $2.55; Now: $1.29 -49.41%; Total return: -49.41%

Tricon Capital (TCN-TSX)

Then: $7.89; Now: $9.57 +21.29%; Total return: +24.96%

Torstar B (TS.B-TSX)

Then: $5.44; Now: $6.51 +19.67%; Total return: +26.51%

Total return average: +0.69%

Market outlook:

Strategy: Cautious! Stocks have seen tremendous gains over the past five years and, despite the positive sentiment around the more recent gains, we are very concerned about the outlook. Investors continue to push stocks to new highs, emboldened by the belief that central bankers will keep buying financial assets to keep interest rates at all-time lows on the hope that investors will channel these gains into real spending in the economy. However that is not occurring and global economic growth continues to be disappointing. Although we don't see a recession in the next year, economic growth is clearly slowing and missing expectations in most regions including recent data out of Japan, China and even the U.S., where the economy faces more headwinds over next few quarters from a higher U.S. dollar, slower overseas growth and reduced spending in the energy sector. Given the risks we are keeping the asset mix at maximum cash/minimum stock levels in all of our managed accounts. Moreover, we have a net short position in stocks in our 'global macro' Hedge Fund. We see little, if any, short-term upside for stocks in this scenario and a much higher risk of a substantial correction. Fixed income investments and preferred shares remain our best alternatives for now.

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