Great West Lifeco (GWO.TO)

(A Top Pick Jan 18/13. Up 25.56%.) This was cheap on a Price to Book basis. The kicker here was what happens if interest rates go up.

Preferred Shares Series P? This rose to about $26.50 about a year or two ago and slipped to as low as $23 and has gotten up to almost $25. These are Perpetual Preferreds and have call date in 2017 at $26, but only if Great West Life chooses to call it. Not a big fan of this kind of Preferred.

Insurance companies do well in a rising rate environment. US 10 year rate has gone up and will continue to. GWO has a relatively cheap multiple.

(Top Pick Jan 18/13, Up 33.22%) If we got a rise in interest rates, this one would get a lift.

Why is this company climbing so much faster than ManuLife (MFC-T)? If you look back pre-crash days, ManuLife was a $42-$44 stock and it really rose to the highs on the back of variable annuity growth. However, variable annuities provided a guarantee to policyholders on certain levels of payout. Ultimately, that was the noose upon which the company got hung. Response by management was to hedge the book aggressively and this has effectively insulated the company from downside but they did it at the bottom of the market. Now the upside associated with the rising capital markets is not as direct as expected, because so much of the book has been hedged. Companies that have less hedging have performed much better.

Likes it. Higher than average dividend. Earnings growth is lower than peers. But will do well going forward. He owns Power as well but not as much as GWO.

Likes life insurance and owns through Power Financial (PWF-T). Power also has IGM and Mackenzie plus a US group. Does Europe rather than Asia, which he prefers. The most conservative of the big three lifecos.

Great West Life (GWO-T) or Power Financial (PWF-T)? Power Financial owns Great West Life, so you get both if you own Power Financial. Have both had pretty nice moves and they have equivalent yields. They trade in a band, so you could choose either one. 10% from now he would be looking to trim as it has done quite well and is getting up there.

Just came out with earnings and they were okay. This is a great company and has always been well run. Has always got one of the higher multiples in the sector. Of the lifecos, this is the best there is. Feels that they are just a little bit ahead of themselves. You’re better off owning banks at these levels as you get a much cheaper valuation with possibly a little better yield. Also, prospects are better down the road.

(A Top Pick August 27/12. Down 0.2%.) 5.4%, Series P. . All 3 picks are down because over the summer, there was a perfect storm of events including 1) the tapering, 2) index rebalances in preferred shares (ETFs must exchange their holdings), which drove prices down and 3) in August there was a program trade go through which drove them down even further.

Just sold his holdings. Had a nice run. Insurance companies are certainly going to benefit if rates rise and equity markets move up. He is seeing a little bit of topping in the last little while although the trend is still there. It is susceptible to come down to the $27-$28 range. Looks like it is time for a pause. 4% dividend.

Very high quality life insurance company. Never had the issues with market sensitivity that the others had. Very safe name. 4% dividend increases over time.

Lifecos are just starting into the reporting period and he thinks we are going to see a relatively good quarter. This is one that has always returned a more consistent ROE.

The period of seasonal strength for financials is normally in the springtime. He would avoid it until then. It is showing signs of rolling over.

Price to book is more expensive than Sun Life (SLF-T) or Manulife (MFC-T). Just did the Irish life transaction which will be very accretive for them.