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

FEATURED PRO: Peter Arender is a portfolio manager with Toronto-based Acker Finley Asset Management, which manages the QSA series of funds. The QSA Canadian Equity ‘A’ fund is down 19.9 per cent in the past 12 months (through Nov. 30) compared to the group average performance of -11.8 per cent.

Arender’s Perspective: “We believe the equity markets are currently fully priced. Assuming interest rates stay
fairly stable, I look for growth in the market pretty much in line with profit growth. The economy does seem to be recovering, haltingly. We’re probably going to see returns of six or seven per cent over the next year.

“We don’t want to get exposed to betting on the economy roaring back or technology roaring back, so our selections are solid earners. At this time, we prefer to hide in the weeds in places that will turn up some reliable earnings.”

First Star
* CP Ships (TEU-TSX)
* Recent Price: $21.44.
* 12-Month Range: $13.60-$21.65.
* Snapshot: CP Ships is a true
greybeard in the shipping biz. It’s been in operation since 1886 and has grown to become one of the world’s largest container shipping companies with more than 80 per cent of its business in North American imports and exports.
* CEO: Ray Miles.
* Head Office: London, U.K. (4,500 employees).
* Vital Stats: Current Price/Earnings Ratio, 24.0; Revenue (last 12 mos), $4.1 billion; Profit (last 12 mos), $74 million; Market Cap, $1.89 billion; Shares Outstanding, 88.17 million; Dividend Yield, 1.17%.
* Arender’s Comment: “We’re pretty focused on valuation and these guys are showing they’re starting to make money again. If they just chug along, I think the valuation is compelling enough that we can give this stock a target price of $27 or $28 which would be pretty achievable by the end of 2003.”
* Arender’s Risk Rating: Medium.
* Web watch: www.cpships.com

Second Star
* Saputo (SAP-TSX)
* Recent Price: $22.82.
* 12-Month Range: $21-$34.25.
* Snapshot: Saputo, operated by the Saputo family since 1954, is Canada’s big cheese with 95 per cent of its revenue derived from its manufacturing and marketing of dairy products, mainly cheese and milk. The company also has a bakery division.
* CEO: Lino Saputo.
* Head Office: Saint-Leonard, Que. (7,000 employees).
* Vital Stats: Current Price/Earnings Ratio, 14.6; Revenue (last 12 mos), $3.4 billion; 5-Yr Revenue Growth, 37.5%; Profit (last 12 mos), $162.6
million; 5-Yr Profit Growth, 23.7%; Market Cap, $2.38 billion; Shares Outstanding, 103.41 million; Dividend Yield, 1.34%.
* Arender’s Comment: “Saputo has shown some good growth over the last couple of years and it’s trading at what we see as a historically cheap valuation. Assuming the fundamentals keep chugging along, I’d suggest it should be worth $32 to $33 over the next six to 12 months.”
* Arender’s Risk Rating: Medium.
* Web watch: www.saputo.com

Third Star
* Home Depot (HD-NYSE)
* Recent Price: $25.55.
* 12-Month Range: $23.18-$52.60.
* Snapshot: Home Depot is the world’s largest home-improvement chain and second-largest retailer after Wal-Mart. It has 1,400 stores in Canada, the U.S. and Latin America.
* CEO: Bob Nardelli.
* Head Office: Atlanta, Ga. (256,000 employees).
* Vital Stats: Current Price/Earnings Ratio, 16.5; Revenue (last 12 mos), $58.5 billion; 5-Yr Revenue Growth, 19.6%; Profit (last 12 mos), $3.7 billion; 5-Yr Profit Growth, 23.2%; Market Cap, $59.42 billion; Shares Outstanding, $2.3 billion; Dividend Yield, 0.9%.
* Arender’s Comment: “They’ve had some difficulty with their earnings numbers in the past couple of quarters. They’re still making tons of money but it’s less than what people were expecting. Home Depot was a darling through the growth period of the 1990s and now the questions are whether the U.S. will go into a recession and if the consumer will continue spending. We think the valuations are so compelling that with this company you only need moderate growth to continue in the next little while. We see pretty good upside even in a fairly stagnant kind of growth environment. We’d expect to see this trading at around $35 (in 2003).”
* Arender’s Risk Rating: Medium.
* Web watch: www.homedepot.com
* Disclosure: Arender says he does not own the individual stocks but owns the Acker Finley funds in which they are held.