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3 top stock picks from Avenue Investment’s Paul Harris

Paul Harris is partner and portfolio manager at Avenue Investment Management. His focus is on North American and global equities.

Top picks:

SunTrust Banks Inc.
Commercial and retail bank in the southeast U.S. The stock trades at 0.7 times book value and at nine times earnings. The company will benefit from a continuing improvement of the U.S. housing market and a continued reduction in cost.

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Leon's Furniture Ltd.
Leon's sells furniture and appliances. It is a great Canadian brand that has a 3.3-per-cent yield and trades at 10 times earnings. A conservative estimate of the property it owns is $5 a share. The company's purchase of The Brick Ltd. should lead to further growth in the next several years.

Bell Aliant Inc.
A telecom company with assets primarily in eastern Canada, Bell Aliant is 44-per-cent owned by Bell Canada. The company yields 7.2 per cent, which increasingly looks safer given management's capex plans. We continue to see improving trends in the core business which should lead to better free cash flow growth in the next several years.

Past picks: March 21, 2012

Microsoft Corp.
Then: $31.91
Now: $28.54
Total return: –7.85 per cent

Goldman Sachs Group Inc.
Then: $125.99
Now: $147.69
Total return: +19.18 per cent

Leisureworld Senior Care Corp.
Then: $11.98
Now: $12.81
Total return: +15.38 per cent

Total return average: +8.90

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Market outlook:

We believe the tremendous amount of sovereign debt outstanding globally will lead to slower growth around the world over the next several years. This will keep rates low for an extended period of time and inflation will be benign. In this environment we look for companies with strong balance sheets and growing dividends.

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