Manulife Financial (MFC.TO)

Since 2007 it is the only financial that is still down from its peak. It has the most room for improvement. They have the ability to resolve all their issues and get the stock up. If he was going to buy a lifeco it would be this one.

(A Top Pick Feb. 1/17, Up 3%) It will do better in a rising interest rate environment. They've restructured since the financial sheet, and their balance sheet is much stronger. Strong, growing Asian operation is quite profitable. The new CEO will address their legacy businesses which have dragged on earnings. Bullish about lifecos, but MFC would be his top pick.

MFC-T vs. SLF-T. They are both in the right area. They do well seasonally at this time. He would favour SLF-T from a technical perspective. It has a rising bottom. It has pulled back down a little today. He favours banks over lifecos.

He is warm to the life insurance business, but does not own this. They over leveraged themselves during the financial crisis. They have some legacy US assets that have hurt their numbers. To unleveraged themselves to interests, it has hurt as interest rates have begun to rise. He questions their management decisions. If you own it, hold it, but there are better ones.

This is the insurance company they own in their portfolios. The company has pulled back below $25. You can start building a position here. She likes their 30% exposure in Asia, which provides higher growth. It has legacy problems in the US, such as John Hancock. They can’t just sell these, and they weigh on valuation. It will take a while to work through these issues, but she likes their asset management, their wealth management business and their core insurance business.

Not enthusiastic about the lifecos for the past five years. Lifecos have to invest for the long term, like buying long-yielding bonds, and have had a tough time making money. Also, MFC has had trouble growing its wealth management business which was supposed to offer healthy returns.

Line of support just under $25. Looks good at these levels and he'd buy it.

Heowns Sunlife instead. Of all the large Canadian financials, Manulife has the strongest earnings growth projections at 15% largely from more fees in asset management side and from their Asian enterprise. Sunlife has greater consistency in earnings growth and higher yield. Manulife's U.S. operations will benefit from U.S. tax cuts.

(A Top Pick Feb 2/17, Up 7.82%) He thinks the US banks are now a better place to be. It is still a great way to play a rising rate environment. He exited 3 or 4 months ago.

(A Top Pick Jan 18/17. Up 14%.) At the time he thought it was cheap relative to its peers. Also, there is a decent dividend and dividend growth. It’s still cheaper than its peers. He is modelling 10% earnings growth and 12% dividend growth.

It is pretty attractive with a decent dividend yield. Lifecos because of the business they are in, benefit from increased interest rates. That should bode well for both MFC-T an SLF-T, the latter of which he owns.

With a rising interest rate environment, this company is well positioned and is his favourite insurance company within the alternatives. 50% of core earnings are now coming from Asia and also their global wealth and asset management businesses. That’s a very high margin and high growth. Under the new president, they are going under a very concentrated resource optimization. A concern over the last few years has been their exposure to long-term care, variable annuities, etc. in the US. That is going to be significantly addressed. He wouldn't be surprised to see dividend increases. Dividend yield of 3%. (Analysts' price target is $31.)

Lifecos are widely believed to be the biggest beneficiaries of higher interest rates, due to large amount of long-term assets they hold, and that they discount their policies. There have been some strong recommendations by brokers on these companies this year. This one has struggled with its debacle in 2008 and then we saw the fortress balance sheet being built. When they do that, they are not taking aggressive action to grow. This has now recovered and is now focusing on their stronger assets, which is Asia. However, there are $2 billion of tax losses they have to forgo because of the change in tax legislation in the US. $30 - $32 would be his target for 12 months.

Except for the nasty bump in 2008, this was like a "buy and forget it" type of company. Always had a dividend increase every year. Record earnings. The last few years have been ugly in terms of taking write-downs, they are still making a lot of money. He likes their Asian exposure. He wouldn't sell.

Canadian insurers are set up nicely here but are taking a pause. In a rate hike environment they will do well and he thinks this year you will see rate hikes in Canada. You want one of these in your portfolio. It will plod along with some nice dividend growth.