(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 Acker Finley Asset Management. The Toronto-based firm manages the QSA series of funds.

Fund form: The QSA Canadian Equity A Fund is down 26.2 per cent in the past 12 months compared to a 15-per-cent performance for the group average.

Arender’s Perspective: “I think we still need to be very cautious about the market. The market has been focusing a lot on the war in Iraq and the feeling has been that the market will take off once that is resolved. I’m not sure that’s necessarily the case.

“I think that although stock prices have been beaten back a lot, they’re certainly not cheap yet, by and large. We’re not looking for much from equities over the next few years.”



FIRST STAR
* Cigna Corporation (CI-NYSE)
* Recent Price: $47.39 U.S.
* 52-Week Range: $34.15-$111.
* Snapshot: Cigna is one of the largest U.S. health insurers, providing group life and disability insurance and other services such as retirement and investment services.
* CEO: Terry Kendall.
* Head Office: Philadelphia (41,200 employees).
* Vital Stats (U.S. funds): Revenue (last 12 mos), $19.3 billion; 5-Yr Revenue Growth, -1.3%; Profit/Loss (last 12 mos), $398 million loss; Market Cap, $6.62 billion; Shares Outstanding, 139.6 million; Dividend Yield, 2.7%.
* Arender’s View: “I’m not saying I love Cigna, but I love the fact that it is trading at a fraction of what the company is worth. Certainly, there are concerns in the insurance business, but it looks to us like the stock is reflecting a hell of a lot of bad news. The short-term fundamental indicators are looking more positive, the stock is very cheap and momentum seems to be turning positive. Our 12-month target is $65.”
* Arender’s Risk Rating: High.
* Web watch: www.cigna.com



SECOND STAR
* Capital One Financial (COF-NYSE)
* Recent Price: $33.31 US.
* 52-Week Range: $24.05-$66.50.
* Snapshot: Plastic makes Capital One’s cash registers ring. It’s one of the top six credit card issuers in the U.S. with nearly 50 million accounts.
* CEO: Richard Fairbank.
* Head Office: Falls Church, Va.
* Vital Stats (U.S. funds): Current Price/Earnings Ratio, 8.6; Revenue (last 12 mos), $9.6 billion; 5-Yr Revenue Growth, 40.2%; Profit (last 12 mos), $899.6 million; 5-Yr Profit Growth, 32.5%; Market Cap, $7.54 billion; Shares Outstanding, 226.4 million; Dividend Yield, 0.3%.
* Arender’s View: “Capital One has been around this price level for the better part of a year and is now starting to show positive change in its fundamentals, and earnings revisions are getting positive again. That tells us that the downward momentum is ending and right now, for a stock that is trading around $35, we’d suggest that its value is probably closer to the
mid-$40s.”
* Arender’s Risk Rating: Medium
* Web watch: www.capitalone.com



THIRD STAR
* Molson (MOL.A-TSX)
* Recent Price: $32.35.
* 52-Week Range: $26-$39.75.
* Snapshot: Molson has had kegs of practice as North America’s oldest brewer at the ripe old age of 226. It has five breweries in Canada, owns 50.1 per cent of Molson USA and is also Brazil’s top brewer.
* Arender’s View: “It’s not cheap relative to where it
historically trades, but it is cheap relative to where other brewers, particularly in the U.S., are trading. The company has great earnings momentum and, in terms of where it’s trading, it’s at least 10-per-cent cheaper. In that time, our measure of its intrinsic value has increased by about 15 per cent so we are looking for a 12-month target of $50.”
* Arender’s Risk Rating: Medium.
* Web watch: www.molson.com
* Arender’s Edge Record: +0.5%. Best Pick: Home Depot (HD-NYSE) +3.4%. Worst Pick: CP Ships
(TEU-TSX) -2.6%.
* Disclosure: Arender says he owns shares in the QSA Fund in which the featured stocks are held.