(Business Edge columnist Gyle Konotopetz regularly profiles the top three stock picks of one of Canada’s most accomplished investment pros.)

FEATURED PRO: Peter Arender is vice-president and portfolio manager with Toronto-based firm Acker Finley Asset Management (www.ackerfinley.com), which manages the QSA series of funds. The firm focuses on value investing using quantitative analysis.

Fund Form: The QSA Canadian Equity Fund (Series A) has a one-year return of 26.2 per cent compared to the group average of 31 per cent, and the QSA Enterprise Fund (U.S.) has a one-year return of 43.6 per cent (group average, 24.6 per cent). Management Expense Ratio: Canadian Equity, 0.77 per cent; Enterprise, 2.68 per cent.

Arender’s Perspective: “With the recent correction in technology stocks, we’re finding a lot of stocks are now trading around where they should be trading. They’re not extremely cheap nor are they particularly over-valued.

“Overall, we definitely see upside in this stock market. We’re not feeling discouraged in the sense of not being able to find stocks that meet our criteria.”



FIRST STAR

* Esprit Energy (EEE-TSX)

* Recent Price: $2.70.

* 52-Week Range: $2-$3.03.

* Arender’s 12-month Target: $4-$4.50.

* Snapshot: Esprit is a junior oil and gas company weighted almost exclusively to natural gas with key assets in the Olds, High River and Three Hills areas of Alberta.

* CEO: Steve Savidant.

* Head Office: Calgary (88 employees).

* Arender’s View: “Esprit seems to be getting no respect from the market these days. The company is earning well, based on what is on their balance sheet and it’s also increasing reserves, which is a rare situation in the oil and gas sector these days.

“It is probably a little more risky because it’s a smaller stock, so you probably don’t want to hold a lot of it in a portfolio, but it looks good from a valuation perspective.”

* Arender’s Risk Rating: Medium.

* Web watch: www.eee.ca



SECOND STAR

* Southwest Airlines (LUV-NYSE)

* Recent Price: $14.92.

* 52-week Range: $12.88-$19.69.

* Arender’s 12-Month Target: $17-$18.

* Snapshot: Southwest is a U.S. airline that specializes in short-haul flights and low-fare service.

* CEO: James Parker.

* Head Office: Dallas (32,847 employees).

* Arender’s View: “All the airlines in the U.S. have been getting crushed, partly because of concerns over competition and partly because of rising fuel costs. Southwest has hedged a lot of its fuel costs and the company has been able to do that because it is one of the very few credit-worthy airlines that can lock in the price of fuel.

“These guys are the class act of the airline business in the U.S. and have been for a few years. Whenever we get a chance to pick up a stock on a valuation basis like Southwest, we’re pretty excited and this one met our valuation targets recently.”

* Arender’s Risk Rating: Medium.

* Web watch: www.southwest.com



THIRD STAR

* Canadian Pacific Railway (CP-TSX)

* Recent Price: $32.15.

* 52-Week Range: $29.78-$38.65.

* Arender’s 12-Month Target: $36.

* Snapshot: CP is a rail freight transportation company with a 22,400- kilometre rail network in Canada and in the U.S. Midwest and Northeast.

* CEO: Robert Ritchie.

* Head Office: Calgary (16,126 employees).

* Arender’s View: “This is a pick purely based on valuation. We’re not super-excited about the growth prospects of this company necessarily, so I don’t look at it as a long-term hold. It has been declining since the end of last year and it now meets our valuation targets. I think by the time it gets to $36 I would want to take some profits.”

* Arender’s Risk Rating: Medium.

* Web Watch: www.cpr.ca

Arender’s EDGE Record: +20.4 per cent. Best Pick: Capital One Financial (COF-NYSE) +132.1 per cent. Worst Pick: Biovail (BVF-TSX) -27.7 per cent.

Disclosure: Arender owns the funds in which the featured stocks are held.