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John Zechner.Danny Yu

John Zechner is chairman of J. Zechner Associates. His focus is on North American large caps.

Top picks:

Athabasca Oil Corp.
Athabasca's stock valuation is excessively low; light oil production alone could justify the current price, meaning all the oil sands assets are effectively free. This includes contingent reserves of 10.6 billion barrels of oil at Dover, Hangingstone and Birch. The current ERCB hearings on the Dover project has investors worried that the $1.3-billion put option with PetroChina on this project might be at risk, however.

Capstone Mining Corp.
With copper prices are set to move higher on stronger global growth and supply disruption, Capstone has levered up its copper exposure with its recent purchase of Pinto Valley mine from BHP Billiton Ltd. Capstone now will have three producing assets (Minto, Cozamin and Pinto Valley) and a development project (Santo Domingo). It also trades at a significant discount to its net asset value, and its balance sheet is strong.

B2Gold Corp.
The former management team from Bema Gold has a strong track record of acquisitions and mine operations in Central and South America. Gold production is expected to double to 750,000 ounces per year by 2017 with production costs below $700 (U.S.) per ounce. The balance sheet is solid and the stock trades at a significant discount to net asset value; it is also undervalued on earnings and cash flow.

Past picks: Aug. 17, 2012

Martinrea International Inc.
Then: $7.93
Now: $10.04
Total return: +26.61 per cent

Calfrac Well Services Ltd.
Then: $25.40
Now: $29.01
Total return: +17.62 per cent

HudBay Minerals Inc.
Then: $8.65
Now: $8.31
Total return: –1.93 per cent

Total return average: +14.10

Market outlook:

Most developed markets have rallied sharply over the past year but those gains were limited mostly to defensive stock sectors. With global growth continuing (the U.S. is strong, Europe stabilizing, Japan potentially recovering, and growth in China is in the 7- to 8-per-cent range) cyclical and growth stocks are starting to join the rally. Stocks can continue to rise even if interest rates have bottomed as long as earnings keep growing. Risks of short-term correction have increased but we still expect stocks to be sharply higher over the next two to three years, helped by asset relocation from the bond market. We recommend overweighted sectors in the U.S. and Canada include basic materials, industrials, energy, technology and financials.