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3 top stock picks from Middlefield Capital’s Andy Nasr

Andy Nasr is portfolio manager at Middlefield Capital. His focus is on Canadian dividend stocks and REITs.

Top picks:

Magna International Inc.
We think improving industry fundamentals and growth in emerging markets will cause Magna's free cash flow to increase by 50 per cent during the next few years. Specifically, we expect the company to benefit from: 1) higher industry production volumes, 2) sales and margin improvement in Europe, 3) declining cap-ex and, 4) increased penetration in emerging markets, which currently comprise about 5 per cent of sales.

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Brookfield Office Properties Inc.
Brookfield trades at a substantial discount to net asset value, which should narrow as occupancy and leasing velocity improve.

Tricon Capital Group Inc.
Strength in the U.S. housing market could increase the value of the company's single family homes and push its net asset value above $9 within the next couple of years.

Past picks: Feb. 16, 2012

Westshore Terminals Investment Corp.
Then: $24.60
Now: $28.58
Total return: +21.83 per cent

Bank of Nova Scotia
Then: $53.62
Now: $58.65
Total return: +13.92 per cent

Algonquin Power & Utilities Corp.
Then: $5.99
Now: $7.33
Total return: +28.09 per cent

Total return average: +21.28 per cent

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Market outlook:

In 2012, both U.S. and European policy makers struggled to implement reforms aimed at minimizing the economic impact of fiscal imbalances. Today, policy risk has diminished, emerging market inflation has moderated and corporate balance sheets remain strong.

We expect economic growth in the U.S. to accelerate, led by an improved labour market, a recovery in housing and declining household leverage. In Europe, the central bank has taken decisive steps toward being a lender of last resort and we believe that economy will climb out of recession within several quarters. The slower growth recently experienced by emerging economies has been affected by deliberate policy decisions designed to curb inflation and diminished demand from developed markets as governments, financial institutions and households de-leverage.

We continue to believe that sustainable long-term global growth will require both structural reforms to facilitate de-leveraging in developed economies and socio-economic improvements to increase domestic demand in emerging markets.

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