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David Baskin.Moe Doiron/The Globe and Mail

David Baskin is president at Baskin Wealth Management. His focus is North American large caps.

Top Picks:

CVS Health (CVS.N)

CVS Health is a giant pharmacy chain with sales of over $108-billion (U.S.) through 6,800 stores. It accounts for 22 per cent of all pharmacy spending in the U.S. The company has an enviable return on equity of 12.6 per cent. The company is transforming itself into a primary health care provider with medical clinics and a wide variety of ambulatory medical services, using its stores as a platform. We see CVS Health as a key player in the transition of American health care and a beneficiary of increased insurance coverage. The stock has a dividend yield of 1.25 per cent and this is growing at about 25 per cent per year.

Google (GOOG.O)

Google is one of the best-known and most valuable companies in the world. With revenues of about $70-billion, it is the giant of the online advertising world. In spite of its size, Google continues to grow quickly, at a compounded rate over more than 20 per cent/annum over the last five years. The company has accumulated cash of about $70-billion or more than $100/share, but does not pay a dividend. Clearly there is scope for a substantial dividend or a large share buyback.

Zimmer Biomet (ZBH.N)

Zimmer Biomet is a manufacturer and distributor of implantable surgical devices, primarily hips and knees. Zimmer merged with Bio-Met this year and together the combined firm will have sales of about $4.6-billion. Significant synergies are expected from the merger. The company has a gross margin of 75 per cent and trades at a modest multiple of 13x forecast earnings. The company pays a modest dividend that is growing rapidly.

Past Picks: September 22, 2014

Cineplex (CGX.TO)

Then: $40.97; Now: $47.58; +16.13%; Total return: +19.69%

Power Corp. (POW.TO)

Then: $32.0;0 Now: $29.89; -6.59%; Total return: -3.99%

BCE (BCE.TO)

Then: $47.65; Now: $54.21; +13.77%; Total return: +17.94%

Total Return Average: +11.21%

Market outlook:

The latest data indicate that Canada is in a mild recession, or at the best, a very low economic growth scenario. While things are clearly worst for commodity producers and the companies tied to those industries, structural impediments have led to a slow pick-up in manufacturing in spite of the low Canadian dollar. In these circumstances we see better growth investment opportunities in the U.S. market. At the same time, the low interest rate environment and favourable tax treatment make high yielding Canadian stocks a must-hold for income seekers, and we see the banks and REITs as particularly attractive at this time. We would not be surprised to see the Canadian dollar slip to the $0.72 (U.S.) level by year end, meaning that there is no substantial currency risk involved in buying U.S. securities.