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Three top stock picks from Davis Rea’s John O’Connell

John O’Connell.

Tibor Kolley/The Globe and Mail

John O'Connell is chairman and CEO of Davis Rea Ltd. His focus is on North American large caps.

Top Picks:

Apple Inc.

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We believe that investors are focusing too much on Apple's hardware and under-appreciating the value of its ecosystem as best evidenced by iTunes and the manner that it can and will be leveraged into a consumer-driven payment system as well as a diversified media company.

Google Inc.

Google is an exceptionally well-financed company that is using its cash balance to grow organically and via acquisitions. The strength of its operating system, YouTube, and its Android platforms ensure that it will be a long-term player as technology continues to transform both industry and the consumer.

Spartan Energy

Spartan Energy is one of the fastest-growing oil producing companies focused on southeast Saskatchewan. The company has quickly assembled an enviable portfolio of properties and we expect that investors are under-appreciating that pace of growth that the company will be able to achieve both through the drill bit and via continued acquisitions. The balance sheet remains very strong and the company has a significant cost of capital advantage because of its well-regarded team and its focus on growth not returning investors' money through dividends.

Past Picks: March 25, 2013

AltaGas Ltd.

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Then: $34.87; Now: $46.72 +33.87%; Total return: +39.25%

Morguard North American Residential REIT

Then: $11.16; Now: $9.70 -13.04%; Total return: -7.18%

Kinross Gold

Then: $8.04; Now: $4.55 -43.41%; Total return: -43.41%

Total return average: -7.18%

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"Now" figures are intraday from the date of the analyst's appearance on BNN Market Call.

Market outlook:

Markets, to continue their advance, are going to need to deliver earnings that justify the optimism that seems to keep certain equities at elevated levels. There is no question that there are areas of rampant speculation in certain sectors of the market. These are the most vulnerable areas and cause for investor concern. If investors keep an even eye on valuations, there are ample choices for profitable investment, if one is prepared to think a bit unconventionally, dig under the hood and stare down the well-known objections to investment.

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