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Rick Stuchberry.

Rick Stuchberry is vice-president and portfolio manager at Richardson GMP. His focus is on Canadian large caps and international ADRs.

Top Picks:

Bonavista Energy (BNP TSX)

Bonavista is a Canadian natural gas company with properties across Alberta. It has a liquid-rich asset base which gets a price premium. The company suffered some balance sheet risk in 2012-2013 causing a dividend reduction, but made it to through the other side – the balance sheet is stronger, the 6-per-cent dividend is hedged, and we think natural gas will strengthen over the winter.

Bank of America (BAC NYSE)

Bank of America had a tough start to the year, but is in a very strong position currently. It has put its lawsuits behind it and can now begin to grow the business. The company quadrupled the dividend once the lawsuits were behind them and we expect further growth in 2015.

Manulife Financial (MFC TSX)

Life insurance companies will be some of the top beneficiaries of falling bond prices. As the Federal Reserve removes the taper program and bond prices fall, causing bong yields to increase, it makes it actuarially easier for a lifeco to offset its obligations. This is a secular strength and we believe Manulife will continue to move higher. The company just raised its dividend and we foresee continued raises in the years to come.

Past Picks: October 22, 2013

BRF SA (BRFS NYSE)

Then: $25.93; Now: $23.83 -8.10%; Total return: -6.60%

Manulife Financial (MFC TSX)

Then: $18.20; Now: $21.77 +19.62%; Total return: +22.80%

ICICI Bank (IBN NYSE)

Then: $35.37; Now: $52.47 +48.35%; Total return: +50.61%

Total return average: +22.27%

Market outlook:

The summer is over, and the market did as we expected. There was a prevalent sideways trend, and cash on the sidelines continued to flow into equities, giving us a small summer rally. We now await the next major market event. The federal reserve in the United States is about to remove the taper program. This program forced liquidity into the system by buying bonds, creating artificially high price levels, reducing yields to historically low levels. This will end in 2014, and we shall begin to see some normalization in bond prices.

With interest rates still at historical lows, we do not yet think it is time to buy bonds, but this is the precursor to rising rates. When rates do eventually move, the markets could change psychology. In the meantime, we will continue to see cash flowing into the stock market rather than the bond market. When the yield curve normalizes, perceptions will change.

Mobile app users click here for a chart showing the taper program.