Manulife Financial (MFC.TO)

It is struggling to go higher. When interest rates go up it is even better for lifecos than the banks. It is a perfect storm for these when rates go up and markets go up. The financial industry is getting lower margins now, however. They are not making a lot in John Hancock and are looking to sell it. They want to push it in to Asia and make a go of it there. It is into a bad time, but you have to pick the right one. He prefers Great West Life (GWO-T).

His main concern about this is their focus in the Far East, particularly China. He doesn’t trust some of the foreign regimes to stay out of the business. If you are into those areas, you have added a political risk. This company has perked up recently. It’s not a bad company, but the exposure in the Far East has added an element of risk that he is not willing to accept.

(A Top Pick Aug 24/16. Up 48.26%.) Good management. New CEO has a lot of Asian experience. There has been recent speculation that the company may sell off some of the less performing assets that they’ve had in the US.

It was fairly unloved for some time and he took a position. He bought it looking for a rising rate environment. He started seeing technical indicators showing a resistance level about where it is now. He decided to harvest the profits and move on to greater opportunities even though it seemed just to be forming a base.

Would prefer the Canadian banks. Lifecos are difficult to analyse. This has gotten so big that is time for them to prune some assets, so selling off their US assets may be a smart idea. He is not so sure this is going to benefit much from rising rates.

There are unconfirmed reports that it is going to spin off or sell the John Hancock unit in the US. Seasonality is from mid-September until the end of the year. It has gone sideways ever since. It has recently been testing its all time high. It is outperforming the market and trading above the 20 & 50 day moving overages. This will probably go down with the market. It is a good time to take money off the table if you are a trader.

There was a report today that they are considering spinning off their John Hancock division in the US. He has a tough time with the insurance industry. Even though rates are going up, they are going up very slowly, which is the difficult part about this business. On a multiple basis they are relatively cheap. Their core insurance business is going to take a long time to get to the kind of rate of returns they are talking about. They have a great undervalued franchise in Asia, which is where there is going to be a lot of growth. Spends a lot of time and money in growing the asset management business, an area where you could see really good growth.

He likes this. It has traded in a sort of sideways trade since the US election. Thinks investors have taken the view that this is sympathetic to the interest rates trade. It has been in a bit of a holding pattern since December until quite recently. With the bond market in a bit of a selloff mode and the recent rate hikes, their macro tailwind is in force once again. This is increasingly a play on Asia, and they are a dominant player in many of their markets there. Not expensive at 11.5X earnings and yielding 3.5%.

A great global franchise, and has made some very good strides since the financial crisis. Part of the reason the stock has not gone up is because of a lot of noise, a lot of moving pieces in their earnings. Their core franchise, especially outside of North America, is very impressive. If interest rates were to go up a little, it would help them make a lot more money. He is bullish on this company.

Sell and Buy back in the fall? If you are going to own something as large as this, he wouldn’t bother trying to trade around it. The direction of interest rates seems to be pointing up. This is worth Buying and Holding.

This goes up and down with the daily thought about rates. The company is doing a good job and has lots of growth in Asia. Expects there is 10%-12% in earnings growth, and the chance of a dividend increase in early 2018.

(A Top Pick June 3/16. Up 30.3%.) At that time, it had better growth than its peers and was trading at a discount. Also, insurers do well in a rising interest rate environment. Even though this is reasonably valued, it has lost its price momentum. He sold his holdings.

(A Top Pick July 25/16. Up 35.38%.) He is seeing more short-term opportunities in long-term stocks because of some sort of sideways event going on in the market.

They’ve been doing much better. His big objection is that they have so much focus in the far East. He would rather have more European/North American focus. Prefers Canada Life. Dividend yield of 3.5%.

(Market Call Minute) It would be one he would add for financial exposure. He is expecting a turn in financials for an insurance company. He would go for RY-T for a bank.