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3 top picks from CastleMoore’s Hap Sneddon

Hap Sneddon is the portfolio manager and technical analyst for CastleMoore Inc. His focus is on technical analysis.

Market outlook

Markets since May have been awaiting the U.S. Fed to aid equities. As we have written to clients since April the last logical day this could occur would be the July 31 to Aug. 1 meeting, thereby avoiding political interference in the U.S. election.

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While data has weakened somewhat over the last few months, we are not convinced the Fed will act. If they do we'll take a more aggressive equity posture for what would be a rental situation. Not only should we expect diminishing returns from another quantitative easing round, but more importantly, long bonds and defensive stocks are showing significant strength and the way forward for serious investors.

Past Picks: July 6, 2011

Bell Aliant

Then: $28.06

Now: $25.02

TR: -6.14 per cent

Pembina Pipelines

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Then: $25.29

Now: $26.93

TR: +13.35 per cent

Jean Coutu Group

Then: $11.40

Now: $14.75

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TR: +32.50 per cent

Total return average: +13.24%

Top Picks:

PPL Corp

This U.S./U.K. regulated and non-regulated utility holding company offers a discount to peers in the sector, a stable income stream, and recently broke a price downtrend from Nov. 2011 to June 2012. Utilities companies enter a strong period of seasonal strength from early summer into late July. Based on macro-economic events, interest rates and money flow into the stock we anticipate a longer term period of strength than normal.

Pfizer

Pfizer, the world's biggest pharmaceutical company, with a credit rating of AA from Standard and Poor's, offer investors the best-in-class in the healthcare sector. The company's drug portfolio is top drawer, its divested its nutrition unit, and offers a decent yield. The sector is strong on a relative basis, outperforming the S&P since 2011.

SPDR Gold Shares Trust

Gold bullion is in a long-term secular bull market. We sold all of 15 per cent portfolio weighting last August, and have been patiently waiting until the spring wherein we established a 5 per cent holding as part of a three- purchase tranche. The remaining tranches will be executed on positive confirmation of price action. Gold is most impacted by deflation and currency concern, not inflation.

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