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Investment Ideas Three top stock picks from ScotiaMcLeod’s Greg Newman

Greg Newman, director and associate portfolio manager of the Newman Group, ScotiaMcLeod. His focus is Canadian dividend stocks and protection strategies.

Top Picks:

Ag Growth International (AFN-TSX)

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AFN's recently proposed acquisition should double their Canadian sales. Along with solid U.S. and international sales growth we believe the company should trade more in line with their 5 year valuation. Enjoy a solid 4.6-per-cent dividend while the story plays out.

Power Financial (PWF-TSX)

We believe PWF can grow their earnings by 8.5 per cent annually over the next 2 years from improvements in their underlying businesses of insurance and capital markets. Investors should also enjoy steady annual dividend growth of about 6 per cent in addition to the already generous 4-per-cent yield.

InnVest REIT (INN.UN-TSX)

We believe InnVest can grow their earnings 24.5 per cent over the next 2 years from higher occupancy and firmer pricing yet they trade at a discount to U.S. Hotel REITs. Earn an almost 7 per cent distribution yield while value surfaces from debt repayment and portfolio enhancement.

Past Picks: March 20, 2014

Baytex Energy (BTE-TSX)

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Then: $43.95; Now: $23.59 -46.32%; Total return: -42.43%

Vanguard FTSE Europe ETF (VGK-NYSE)

Switched 7/8 of VGK into HEDJ last fall (so 1/8 of original position of VGK left for myself, family and portfolio)

Then: $58.46; Now: $56.50 -3.35%; Total return: +1.31%

Bank of America (BAC-NYSE)

Then: $17.92; Now: $15.69 -12.44%; Total return: -11.58%

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Total return average: -17.57%

Market outlook:

Equities are expensive here and it is difficult to find compelling value. Add in upcoming Greek uncertainty, seasonality, softening U.S. data, a murky Q1, and investors are understandably nervous. But equities are still far more compelling than bonds. That alone should help markets at least grind sideways with the hope that the news flow soon improves. Like last year I believe much of the softening U.S. data is weather related. As well, a moderating U.S. dollar, a pickup in European data, a more accommodative PBOC and the eventual effects of lower commodity prices should lend support. Stronger economic traction will ultimately lead to fears of rate hikes, which if warranted, will actually be a positive for equities initially – as in past cycles. But given the global deflationary environment, I believe the level of any rate increases over the next year or two are likely to be benign. So continue to buy the dips.

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