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Ryan Modesto is managing partner, 5i Research. His focus is Canadian small and mid-cap stocks.

Top Picks:

Savaria (SIS.TO)

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Savaria faces strong demographic tailwinds with the baby boomers living longer and healthier lives. There will be an increasing demand for accessibility and mobility products to allow for this demographic to remain in their homes instead of having to move into some form of care facility. SIS also pays a nice dividend and expects to see 10-per-cent to 14-per-cent revenue growth out to 2018. With high insider ownership and an appetite for acquisitions, there is good long-term potential here, but investors need to watch the lower liquidity.

Andrew Peller (ADWa.TO)

With the Ontario government looking to increase access to wines and spirits, ADW could benefit. The company is also building a winery and distillery under the Gretzky Estate name with completion expected in 2017, which should offer some growth potential. What is most interesting is that ADW is a name that has been hitting all-time highs in a bad market while having no analyst coverage and being relatively unknown, which we think helps to show that there are other market participants that are very interested in this stock.

Concordia Healthcare (CXR.TO)

Concordia is being priced as if it is going out of business (below book value), yet generating strong cash flows and being diversified geographically. Only 40 per cent of revenues come from the U.S., where many investors are concerned about politicians making operations difficult for the sector. Debt is a risk, but management is confident in being able to pay it down, and no single product makes up more than 10 per cent of revenues.

Market outlook:

Largely everyone in Canada knows the oil story by now. At roughly 19 per cent of the TSX composite market cap (and a much higher weighting just a year ago), the country is going to feel a drag because of this sector. While it is hard to be overly excited by the near-term prospects in Canada, we think investors are starting to realize two things:

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1) There is more to the Canadian economy than resources and financials.

2) Things might not be quite as bad as they sound.

Canadian banks, which many were concerned about, seem to have made it through earnings season relatively unscathed and are raising dividends. GDP is growing, albeit slowly, but still topping expectations, while lower oil adds discretionary money to everyone's wallet. A low dollar should eventually help exporters and companies with a footprint in the United States. With the TSX composite hovering around 16 times earnings and yielding 3.5 per cent, the market is showing some interesting opportunities, particularly across growth names that have seen significant pullbacks since the beginning of the year. We think that investors who can ignore the noise from the daily swings in oil and find good companies outside of the energy that show growth and an ability to navigate a slowing economy will do just fine over the year.

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