(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 (www.mcleanpartners.com).

McLean & Partners manages portfolios for private families and foundations, backed by independent research that is recognized by Investorside Research Association.

Tahiliani’s Perspective: “Short-term (30 to 60 days), the markets look extended and we may see a pullback given the large run-up over the past seven weeks. We continue to focus on a barbell approach to portfolios with defensive and growth stocks. Corporate restructuring continues due to slow U.S. economic growth, excess capacity and the resulting lack of pricing power across various industries.

“Despite the valuation of the overall market, we continue to focus on dividend growth stocks, which we define as those companies that are able to grow their dividends annually at greater than the inflation rate. Ideally, we look for companies that have compound annual dividend growth rates of eight per cent or higher on a minimum five-year basis.”



FIRST STAR
* Power Financial (PWF-TSX)
* Recent Price: $41.57.
* 52-Week Range: $31.05-$44.50.
* Snapshot: Power Financial is a diverse financial services company with interests in Great West Life Co. (and Canada Life) as well as Investors Group and Mackenzie Financial. The company is controlled by the Desmarais family.
* CEO: Robert Gratton.
* Head Office: Montreal (26,000 employees).
* Vital Stats: Current Price/Earnings Ratio, 15.3; 2002 Revenue, $18.6 billion vs. $17.8 billion in 2001; 5-Yr Revenue Growth, 14.3%; 2002 Profit, $988 million vs. $879 million in 2001; 5-Yr Profit Growth, 8.9%; Market Cap, $14.5 billion; Shares Outstanding, 348.40 million; Dividend Yield, 2.69% (5-yr compounded annual dividend growth rate is 19%).
* Tahiliani’s View: “The Desmarais (family members) are excellent managers and integrators of new businesses. The acquisition of Mackenzie Financial and Canada Life in 2003 add to the company’s well-managed insurance and investment services platform.
“Power Financial provides a defensive play on the
insurance industry while providing upside on the wealth-management business. Regardless of how the
pending changes in the Canadian banking landscape unfolds, Power is likely to play a leading role through the breadth of its service platform. Since the beginning of 2002, the company has increased its dividend by 17 per cent. It has been a core holding for us since 2001.”
* McLean & Partners Risk Rating: Medium.
* Web watch: www.powerfinancial.com



SECOND STAR
* Pfizer (PFE-NYSE)
* Recent Price: $31.85 US.
* 52-Week Range: $25.13-$37.66 US.
* Snapshot: Pfizer is the world’s largest pharmaceutical company, operating in two business segments – pharmaceutical (92 per cent of revenue) and consumer
products. The company recently completed its merger with Pharmacia. Its best-selling drug is Liptor, for reducing cholesterol, with annual worldwide sales of $8 billion US.
* CEO: Henry McKinnell Jr.
* Head Office: New York (98,000 employees).
* Vital Stats (U.S. Funds): Current Price/Earnings Ratio, 16.7; 2002 Revenue, $32.5 billion vs. $32.3 billion in 2001; 5-Yr Revenue Growth, 23.5%; 2002 Profit, $11.9
billion vs. $7.8 billion in 2001; 5-Yr Profit Growth, 18.3%; Market Cap, $263 billion; Shares Outstanding, 6.2
billion; Dividend Yield, 1.88% (5-yr compounded annual
dividend growth rate of 17%).
* Tahiliani’s View: “Pfizer is financially strong with $15
billion in cash and annual cash flow of $12 billion. It has a very strong drug pipeline, is good at integrating new operations, has deep pockets for licensing agreements and any legal battles and an excellent marketing and distribution sales force. The company has repurchased $13 billion US worth of its stock over the last quarter and has committed another $3 billion US to buybacks. Pfizer is a recent addition to our portfolios.”
* McLean & Partners Risk Rating: Medium.
* Web watch: www.pfizer.com



THIRD STAR
* iUnits Gold Fund Index (XGD-TSX)
* Recent Price: $39.72.
* 52-Week Range: $34.40-$59.75.
* Snapshot: The iUnits fund is an exchange traded fund that is comprised of 11 TSX-listed gold companies. The largest holdings are Barrick Gold (25%), Placer Dome (24%), Kinross Gold (12%) and Goldcorp (11%). It is 100-per-cent RRSP eligible.
* Vital Stats: Market Cap, $159 million; Shares Outstanding, 4 million; Management Expense Ratio, 0.55%.
* Tahiliani’s View: “Since gold hit a peak of $383 US per ounce in February, we have waited patiently for an entry point. We believe gold has stabilized around the $325-$330 US range. We recently purchased XGD at $37.
“In the short term, we see gold exposure as a hedge against another market downturn. In the longer term, we like gold due to the following factors: reduced hedging by gold producers, continued U.S. dollar weakness due to the large current account and federal budget deficits, the potential for U.S. inflation over the next two to three years and the fact that gold equities are trading at a low premium relative to their net asset values. We see upside on XGD in the $50 range over the next two years.”
* McLean & Partners Risk Rating: Medium to High.
* Web watch: www.iunits.com
* Disclosure: Tahiliani may hold positions in the featured stocks.