Manulife Financial (MFC.TO)

They gave a lot of clarity on their legacy products at their Investor Day last week. They are expanding other parts of the business to drive down the impact of legacy businesses on their overall income. Their new CEO used to run Manulife Asia, which is very high growth. Their PE multiple of 9x is very low compared to Sun Life’s 12x. Their target ROE is 13% and they achieved that in the first quarter. The company’s Price to Earnings and Price to Book will rise if ROE stays this high. (Analysts’ price target is $29.65)

SU-T vs. MFC-T. As interest rates rise, this is better for insurance companies. This will cease to be the case if the central banks tighten so much that it sparks a recession. These companies get hit more during economic downturns. Insurance companies will not do as well this late in the cycle.

Buying opportunity? Never been a fan of Manulife. Always preferred Sun Life. Their announcements shake investor confidence. He stays within North America for investments. Concerned about emphasis on Asia for growth. Plus chatter about getting out of Hancock makes it a little too complicated.

He owns no insurance companies. This one has had issues amongst the bunch with their acquisition of Hancock. They inherited the issue of long term care. It has unlimited liability potential. It is the cheapest and highest grower of the insurance companies and they have the Asia division growing quickly. This could be a unique asset. This is the torquey name to own. He is interest in it. 3.5% dividend. He is looking at it.

Manulife (MFC-T) versus Sunlife (SLF-T). He owned Manulife going into the financial crisis, but became concerned about management and sold out of their holdings. When Sunlife began to fall in sympathy they bought them – focusing on the preferred shares in particular. Manulife still has some questionable assets in the US and may not know how to offload them.

This is a good long term high quality company at these price levels and likes the dividend growth record. The new management team is solid. He likes their core wealth management business. Trading at less than 10 times 2019 earnings, this is a good buy. Yield 3.7%. (Analysts’ price target is $29.65)

He attended their investor day yesterday. It showed some of the work they are doing to clean up their legacy business. They have two real superstar crown jewels: Their Asian division and their wealth management division. Dividend is likely to grow. He thinks it is good value right here.

It has recently had good news on rate increases. They have transitioned from just insurance to wealth management products. In Canada they plan to digitize the back office and reduce staff by 700. The valuation is still a little high, compared to the bank sector.

It's a little undervalued. Earnings are fine. Everything is fine for this to grow. Bay St. has a $30 target. There'll likely be a dividend increase in six months. He'd buy this under $25.

Does it make sense to buy in a raising interest environment? Yes. They have some legacy issues. Still earnings are 19% up. Capital position came out at the higher end of the range. Growing at 10% a year and trading at 8.8 times earnings. 9% dividend growth. A name to own right here right now.

They have a great, rapidly growing franchise in Asia and a good one in Canada, but their John Hancock operation has been difficult for them, dragging on their ROE. They need to exit--or do something with--Hancock, which is the root of
their problems. If they do, their stock will go up. They should sell Hancock and reinvest in Asia. The rest of their operations are doing gangbusters.

He does not have a great explanation for why this is not advancing like Sunlife, especially with higher interest rates recently. His fundamental analyst thinks it has some weaker financials compared to the other insurer. Yield 3.6%.

A play on higher interest rates. Good growth in Asian operations. The recent pullback it fell below 10x earnings. Thinks this will reach $27-28 easily. Probably a dividend increase in 9 months. (Analysts' price target: $29.86)

It has traditionally seen a hard time with its share price going up. He would not get overly attached to it. They have passed the capital requirement for insurance companies. 3.5% dividend, 10 times PE. But a lot of metrics are similar to the banks, which he prefers to MFC-T.

They should be doing well. Interest rates are creeping higher, which should be good for them. However, they are facing higher capital requirements, which raises some concerns. This is probably what is depressing the stock price. The stock pays a decent dividend so he doesn’t mind waiting until they fix their capital structure.(Analysts’ price target is 30$)