Stockchase Opinions

Stan Wong Great West Lifeco GWO-T BUY May 02, 2024

Likes it, screens well. Decent price to book ratio, attractive relative to other names today. Shares have come down with the correction, mainly due to interest rates popping up a bit. Affected by interest rates. Quality, good management. Yield is 5.4%, strong.

$41.770

Stock price when the opinion was issued

insurance
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DON'T BUY

Earnings were underwhelming. A more expensive stock in the insurance space. Insurance companies are set up to continue to outperform the banks. Everyone's looking for yield. Look to MFC as #1 in the space.

COMMENT
Preferred GWO

On a total return basis including dividends, the return in positive; without the dividend, it looks negative. So you have to hold this a long time to ride out the fluctuations as you collect the dividends.

TOP PICK

For income-oriented investors. Mature market focus in Canada, US, and mature parts of Europe; whereas MFC and SLF are pursuing growth more in EMs. Better on capital allocation, likes growth potential. Trades at less than 10x earnings. Attractive yield of 5.2%.

(Analysts’ price target is $44.20)
BUY

Great company, high quality. More focused on investments than some of the other insurance companies. Hitting new highs.

TOP PICK

Revenues from asset management, insurance, annuities, health benefits. Very diversified. Around for decades. Likes the safety and growth over time. Dividend growth is about 8%. Payout ratio still in 50-70% range. High quality. Not necessarily a home run, but a single: core holding for the long term, dividend payments, some price appreciation. Yield is 4.6%.

Because it's diversified, interest rate moves benefit different segments at different times.

(Analysts’ price target is $49.50)
COMMENT

Both companies have done quite well and both are cheap with secure dividends. It has been a good year for the sector but they may not get the same returns going forward.

HOLD

All the insurance names, both in Canada and the US, continue to work. If interest rates do, in fact, go higher, that will only be beneficial for lifecos and other insurers. The chart looks fantastic. Good run, so there is some weakening in the intermediate term.

If a long-term holding, best thing you can do is sit on your hands and do nothing except participate in the DRIP program. Especially if he's right on the broader call of rates being 8-10% in the secular bear market of 2030-40, should be a big tailwind for insurers.

BUY ON WEAKNESS

Really likes it for income. Very disciplined and methodical acquisitions. Global platform:  Canada, US, and Europe. Recent earnings growth was from US side, and this will likely continue due to demand and to weak CAD. Above his buy price, so just wait a bit. Yield is 4.7%.

Unspecified

He owns both this and Manulife. Rates going up have helped a lot. They are working on improving the U.S. side which wasn't going well. The Canadian side is doing well.