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

FEATURED PRO: Anil Tahiliani is a partner and portfolio manager with Calgary-based McLean & Partners Wealth Management. McLean & Partners manages money for very high net-worth individuals and families based on global asset allocations with a focus on Canadian and U.S. dividend growth stocks (www.mcleanpartners.com).

Anil’s Perspective: “Short term, 30 to 60 days, the market looks extended and we may see a pullback given the large run-up over the summer. We continue to focus on a barbell approach to portfolios with defensive and growth stocks.

“Although U.S. economic growth is picking up, we believe that the stock market already reflects this good news. We need to see strong U.S. job growth and GDP growth at five per cent or higher before the stock market can have another major leg up. Looking out to 2004, we are concerned about the ballooning U.S. budget deficit and its impact on the U.S. dollar and economy.”




FIRST STAR
* Diageo (DEO-NYSE)
* Recent Price: $42.27 US.
* 52-Week Range: $37.55-$53 US.
* Snapshot: Bottoms up! Diageo is the world’s largest beverage alcohol company with sales in more than 150 countries. Its brands include Smirnoff, Johnnie Walker, Guinness, Baileys, J&B and Captain Morgan. Diageo also has a 21-per-cent interest in General Mills.
* CEO: Paul Walsh.
* Head Office: London, England.
* Vital Stats (U.S. funds): Current Price/Earnings Ratio, 14.1; 2002 Revenue, $13.5 billion; 2002 Earnings, $2.9 billion; Market Cap, $339.7 billion; Shares Outstanding, 803.72 million; Dividend Yield, 3.9%.
* Tahiliani’s View: “Diageo has recently completed a
two-year restructuring which involved selling its interest in Pillsbury and Burger King so the company can focus solely on its premium-brand alcohol business. Diageo has 21-per-cent operating margins with a seven-per-scent growth rate. The company is expected to monetarize its interest in General Mills over the next year with proceeds toward debt repayment and continued share buybacks. Over the last five years, the company has grown its dividend by an average of 7.4 per cent per year. Our fair value on the stock is $48-$52 over the next 12 months.”
* Risk Rating: Medium.
* Web watch: www.diageo.com



SECOND STAR
* Atlas Cold Storage Income Trust (FZR.UN-TSX).
* Recent Price: $11.18.
* 52-Week Range: $10.05-$13.42.
* Snapshot: Atlas is the coolest of companies. It
provides temperature-controlled storage and logistics services to food processors, distributors and retailers across North America. In terms of cold-storage facilities, Atlas has a 35-per-cent market share in Canada and nine per cent in the U.S.
* CEO: Patrick Gouveia.
* Head Office: Toronto.
* Vital Stats: Current Price/Earnings Ratio, 28.0; 2002 Revenue, $296 million; 2002 Earnings, $16 million; Market Cap, $683.48 million; Shares Outstanding, 61.1 million; Estimated Yield, 8.7 per cent.
* Tahiliani’s View: “The company recently restated
its fiscal 2002 and 2001 results due to accounting irregularities and, as a result of media coverage, the stock has declined approximately 20 per cent. Although we are not happy about the restatements, the fundamental business remains strong. Atlas provides mission-critical services to the food-distribution business. With TD Private Equity as the largest shareholder at 12 per cent of the shares, we expect to see a few personnel changes in the next few weeks to restore management credibility. Investors who are willing to ride out the storm should be rewarded in the long term.”
* Risk Rating: High.
* Web watch: www.atlascold.com



THIRD STAR
* Astral Media (ACM.A-TSX).
* Recent Price: $25.02.
* 52-Week Range: $16.55-$25.99.
* Snapshot: Astral is a media company with three operating segments: television, including pay TV, pay per view and specialty channels in Eastern Canada; radio, with 24 stations; and outdoor advertising in Alberta, B.C., Ontario and Quebec.
* CEO: Ian Greenberg.
* Head Office: Montreal.
* Vital Stats: Current Price/Earnings Ratio, 22.1; 2002 Revenue, $400 million; 2002 Earnings, $57 million; Market Cap, $1.3 billion; Shares Outstanding, 51.77 million; Dividend Yield, 0.6%.
* Tahiliani’s View: “We like Astral Media because it has a dominant position in the Quebec media market in terms of French-language pay TV, specialty channels and radio. It is a low-capital expenditure business since the company is involved in production of programs. It has high-margin businesses. Its year-over-year growth based on its last quarter was 21 per cent for revenue, 36 per cent for EBITDA and 43 per cent for EPS. It has free cash flow of $50 million expected for 2003 based on annualized revenues of $450 million and low debt of $30 million. It’s a long-term play with a $30-$32 fair value price over the next 18 to 24 months.”
* Risk Rating: Medium to High.
* Web watch: www.astralmedia.com

McLean & Partners Recent Actions: The firm recently trimmed its holding of the iUnits Gold Index (XGD-TSX) by 50 per cent, given the large run-up in gold prices in August, and locked in a 35-per-cent profit over five months.
“We still believe that investors should have gold exposure in their portfolios and we would add to our position on any major pullback in XGD shares,” says Tahiliani.
Tahiliani’s Edge Record (with May picks): +10.3%. Best Pick: iUnits Gold Index (XGD-TSX) +50.95%. Worst Pick: Pfizer (PFE-NYSE) -0.3%.
Disclosure: Tahiliani and other employees of McLean & Partners may hold positions in the featured stocks.