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Three top stock picks from Avenue Investment’s Paul Harris

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

Top Picks:

Deere & Co. (DE-NYSE)

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We see Deere as well-positioned to benefit from long-term trends toward increased crop production and consumption. The stock is cheap trading at 12 times earnings, has a dividend yield of 2.2 per cent and trades at price to book value of 3.3 times.

Target Corp. (TGT-NYSE)

Target operates general merchandise discount stores in North America. The stock has suffered lately over its expansion in to Canada and the security breach of their credit card information. Many of these seem to be behind the company and with the continued positive economic growth in the U.S., we think the stock looks cheap. It trades at 12.9 times earnings and has a dividend yield of 2.8 per cent.

Qualcomm Inc. (QCOM-Nasdaq)

Qualcomm is an industry leader with dominant market share in a growing industry. It has a well-developed market road-map and is generations ahead of competitors. Revenues and EPS growing of 10%+ CAGR over the next five years. It has an attractive valuation at 13.4x eps plus a dividend of 2.2 per cent and a commitment to return capital to shareholders.

Past Picks: April 26, 2013

Davis+Henderson (DH-TSX)

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Then: $22.75; Now: $30.43 +33.76%; Total return: +40.31%

Bank of America (BAC-NYSE)

Then: $12.42; Now: $15.24 +22.71%; Total return: +23.03%

Brookfield Asset Management (BAM.A-TSX)

Then: $38.08; Now: $45.73 +20.09%; Total return: +22.16%

Total return average: +28.50%

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Market outlook:

Global stocks should continue their slow long-term "grind" higher due to low interest rates, high corporate probability and continued global GDP expansion. Concern arises from emerging markets that have a continued lack of visibility. Bond yields will continue to stay low for the short and medium term as central banks withdraw monetary liquidity slowly. We think the opportunity is increasing in companies that can achieve good total return – a good dividend yield accompanied by strong balance sheets and high cash flow cover. In a low inflation environment these stocks are likely to remain attractive.

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