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

FEATURED PRO:

Mark Stevens is the president and founder of Vancouver-based Watermark Capital Management, an investment management boutique that prides itself on value investing, the approach pioneered by Benjamin Graham and
David Dodd.

Stevens’ picks are held in the Watermark Value Fund, which boasted a 4.52-per-cent return in the first six months of this year.

STEVENS’ PERSPECTIVE: “We generally focus on securities rather than figuring out where the market as a whole is going. We buy stocks we think are cheap regardless
of the sectors they are in. Statistically, the market as a whole still looks expensive, so I think there’s still potential on the downside. We look for companies that are priced at a discount to our estimate of their intrinsic value.”



FIRST STAR
* Brascan Corporation (BNN.A-TSX)
* Recent Price: $33.
* 12-Month Range: $22.10-$37.50.
* Snapshot: Brascan packs a lot of punch as a heavyweight owner, operator and builder of businesses primarily in
the commercial real estate, financial services and power generation spaces. The firm is also invested in resources companies. More than 60 per cent of its $21 billion in assets are outside Canada, mainly in the U.S. and South America.
* CEO: J. Bruce Flatt.
* Head Office: Toronto (50,000 employees).
* Vital Stats: Price/Earnings Ratio, 21; Revenue (last 12 mos), $1.2 billion; Profit (last 12 mos), $311 million; Market Cap, $9.5 billion; Shares Outstanding, 287.9 million; Dividend Yield, 3.1%.
* Stevens’ Comment: “Management, on a quarterly basis, provides an estimate of what they think the net asset value of the company is and currently their estimate is about $47 a share. Even if you regard that as generous, at $33 it’s still trading at a significant discount to its net asset value.”



SECOND STAR
* Canadian Natural Resources (CNQ-TSX)
* Recent Price: $52.93.
* 12-Month Range: $39.50-$54.54.
* Snapshot: The senior oil and gas company has its operations focused in Western Canada, the North Sea and offshore West Africa through its wholly owned subsidiary, Ranger Oil. The focal point of its growth is the Horizon Oil Sands Project, north of Fort McMurray.
* CEO: John Langille.
* Head Office: Calgary (1,186 employees).
* Vital Stats: Price/Earnings Ratio, 15.6; Revenue (last 12 mos), $3.2 billion; 5-Yr Revenue Growth, 38.5%; Profit (last 12 mos), $538.7 million; 5-Yr Profit Growth, 47%; Market Cap, $7 billion; Shares Outstanding, 133 million; Dividend Yield, 0.9%.
* Stevens’ Comment: “My interest here is primarily in its exposure to natural gas. I think that we’re probably going to see higher natural gas prices in the future and CNQ has good exposure to that. It’s especially difficult to estimate net asset values for resource companies because of the volatility of commodity prices. But I think natural gas prices are likely to be higher in the future and, on top of that, they have the Horizon Oil Sands Project. First Energy Capital Corporation did a review of that project recently and in a report in June they estimated the value of that project to CNQ was about $15 per share. So from our point of view that provides us with a margin of safety that we
look for.”

THIRD STAR
* Apple Computer (AAPL-Nasdaq)
* Recent Price: $15.61.
* 12-Month Range: $13.80-$26.17.
* Snapshot: The core of Apple’s business is personal computers and the company also provides publishing and multimedia software and database software through its subsidiary, FileMaker.
* CEO: Steve Jobs.
* Head Office: Cupertino, Calif. (9,603 employees).
* Vital Stats: Price/Earnings Ratio, 30; Revenue (last
12 mos), $5.7 billion; 5-Yr Revenue Growth, -3.4%; Profit (last 12 mos), $176 million; Market Cap, $5.55 billion; Shares Outstanding, 355.7 million.
* Stevens’ Comment: “Apple’s share price has been depressed along with many other technology companies. This company has a very attractive balance sheet with over $11 (per share) in net cash so you’re really paying about $4 (per share) for their business, which is profitable.”
* Disclosure: Stevens says he personally owns positions in two of three featured stocks, Brascan and Canadian Natural Resources, and also owns shares in the Watermark Partners Value Fund in which they are held.