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John O’Connell.

Tibor Kolley/The Globe and Mail

John O'Connell is chairman and CEO of Davis Rea. His focus is North American large caps.

Top Picks:

Spartan Energy (SPE TSX-V)

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Spartan is a fast growing oil company operating in the southeast Saskatchewan area with an excellent management team, strong balance sheet and very high profits per barrel. We expect that the company will continue to buy resources from highly-levered competitors and then exploit the resource from its growing cash flows.

International Business Machines Corp. (IBM NYSE)

IBM continues to make good progress on its investments in software applications and consulting. We think investors are overly focusing on the ebbs and flows of the competitive process in industry and are neglecting the fact that the company has a strong balance sheet and enormous human capital resources with which it can compete.

Google Inc. (GOOGL NASDAQ)

Google continues to innovate new products and also compete aggressively in its already-dominant positions of search, mobile and media via products like YouTube. We feel that its strong balance sheet, visionary leadership and diverse employment structure positions itself well for the future.

Past Picks: March 25, 2013

AltaGas Ltd. (ALA TSX)

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Then: $34.90; Now: $49.08 +40.63%; Total return: +47.58%

Morguard North American Residential REIT (MRG.UN TSX)

Then: $11.16; Now: $10.47 -6.14%; Total return: +1.64%

Kinross Gold (K TSX)

Then: $8.04; Now: $4.42 -45.02%; Total return: -45.02%

Total return average: +1.40%

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Market outlook:

Investors generally continue to pursue equities with caution and fear. While stocks remain expensive, alternatives remain unattractive in this low rate environment. We expect rates to remain for at least 1 more year and this should prove to be supportive to equities in general. The end of Fed bond purchases does not mean an end to Fed support of the economy but it may present investors with fits of fear as the markets adjust to more competitive alternatives. We feel that if the feds retreat from super stimulus to moderate support is accompanied with earnings growth in a non-inflationary manner, that good companies can be continued to acquired.

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