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Jennifer Radman is vice-president and senior portfolio manager at Caldwell Investment Management. Her focus is U.S. large caps.

Top Picks:

Verizon Communications Inc. (VZ NYSE)

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This is a recent purchase in the Caldwell Balanced Fund. The company enjoyed strong growth on the back of 4G adoption but investors have begun to question pricing and margin power as competitors have caught up to the company's product offerings. We view this as a good buying opportunity as Verizon is best in class in terms of investing in its product and service offerings.

Varian Medical Systems (VAR NYSE)

Varian Medical is the world's leading provider of radiation therapy equipment, mainly used in cancer treatment. Revenue growth in the U.S. has been tepid stemming from uncertainty in reimbursement rates and Obamacare, which have put investment spending by hospitals on hold. We think this is a temporary issue and creates a buying opportunity, as cancer rates continue to climb and a product refresh cycle looms. Outside of the U.S., radiation equipment per capita is well below U.S. levels, which should continue to drive growth for the company's products. A high ROE reflects the company's leadership position and competitive moat, and we like the fact that both revenue and earnings continued to grow throughout the recent recession.

Chevron Corp. (CVX NYSE)

The company is trading at a compelling valuation and significant discount to the market. Investors seem to be taking a wait-and-see approach as several large projects come on line. However, these will improve the company's production profile over the next few years and, in the meantime, Chevron will benefit from current strength in commodity prices. The company does an excellent job of earning a strong return on its investments, which will drive shareholder value over time.

Past Picks: August 1, 2013

CSX Corp. (CSX NYSE)

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Then: $25.44; Now: $30.81 +21.11%; Total return: +23.86%

ANN Inc. (ANN NYSE)

Then: $34.67; Now: $41.90 +20.85%; Total return: +20.85%

FedEx (FDX NYSE)

Then: $110.00; Now: $148.88 +35.35%; Total return: +36.02%

Total return average: +26.91%

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Market outlook:

Stock markets have been strong with the Canadian and U.S. markets up 21 per cent and 37 per cent, respectively, since the beginning of last year. The lack of significant corrections over this period has driven worries and speculation about a pull back. While the market certainly has the potential to come off of recent highs, calls for caution have been heard for some time and illustrate the difficulty in timing the market.

Our investment process has us focus on company valuations as the driver of investment returns over time. While valuations in certain areas of the market seem high, others still show fair-to-compelling value. Our strategy of owning a concentrated portfolio of stocks (approximately 25) across the U.S. and Canada means we can be selective about where we take risk for our clients, which is important in the current environment.

The best protection from near-term market volatility is to pay reasonable valuations for well-managed companies with strong balance sheets, as these are the companies that can withstand losses of confidence and are likely to emerge even stronger once confidence returns.

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