Manulife Financial (MFC.TO)

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.

He has been negative on the insurers because they can’t make money on their bond portfolios. This is bad for life insurance companies. He sees a much muted outlook for interest rates so does not buy big insurance companies.

Rising interest rates should be a bit of a tailwind for them. The demographics for people looking to annuitize their wealth in wealth management, are good for this company. He feels the new CEO is on track to continue turning the company around. Has a good understanding of the Asian/Pacific business. Dividend yield of 3.1%. (Analysts' price target is $30.)

This is going to have the same backdrop and look a little like Toronto Dominion (TD-T) and a lot of the banks. Chart shows a little downtrend. Insurance companies did get a little soft, because they are not pure financials. This is a good stock to hold. These benefit from a strong market. If it got a little lower, around the mid-$25, that would be a good place to step in.

The stock hadn't done much for a long, long time. It’s finally broken out and making some progress. Chart shows a developing channel of higher highs and higher lows. If you own, you have to be patient. Quite likely, too many people were too bullish for too long. The market takes time to digest.

This is very interesting and has a very strong franchise in Asia. They have some very good high ROE Canadian businesses. The big decision for them is a need to get out of the US business and drive their ROE higher. If they can do that, the stock will do much, much better. A great story and pays a good dividend yield.

This has been a gift that keeps giving. It has done very well over the last few years. He has this trading at 11.1 2018 versus Sun Life (SLF-T) at 11.4. There has been convergence amongst all the insurance companies in Canada. To him, this is a good deal. He models it growing at 9% with a 13% dividend growth. Good balance sheet. On a little bit of a pullback, you could buy this.

They have operations around the world. They are the large asset business in Canada and the US. The new management was positive for the stock and it had a good run. He would pick SLF-T over MFC-T, however. Both are decent investments.

(A Top Pick Feb 1/17. Up 11%.) The life insurance industry is very well positioned to take advantage if we have rising rates going forward. This company has always been particularly adept at placing itself in Asia where there is a tremendous amount of growth. Well diversified. With the new CFO, he thinks they are going to pay attention to some of the legacy problems they've had in the US. Overall, he expects profitability and margins will have a very good chance of increasing fairly significantly over the next while. This is still a Buy.

(A Top Pick Nov 18/16. Up 21%.) He still likes the insurers. Trading at 1.4X Price to Book which is not bad. 3% dividend yield, with a decent healthy growth rate. Rising interest rates and a stronger economy is going to help insurers like this. They are diversified into the Asian space, which should help them longer-term. A solid, steady name going forward.

He would prefer it a little cheaper, perhaps $24-$25. He likes this longer-term. Good business and good growth in Asia. The question is, can they offload some of their poorer US businesses. Overall, this is a good company. They increased their dividend last year by about 10%, and he expects another increase this year. (See Top Picks)

Banks? or lifecos? He sold MFC-T about a year ago. They are a great play on rising interest rates. He did not think they would go up as fast as they did and so he allocated to bank shares.

(A Top Pick Jan 11/17, Up 13%) They have a great deal of exposure to fixed income. There is a new CEO who is quite impressive. Their Asian operations are their crown jewel. The 3% dividend should continue to grow.