Manulife Financial (MFC.TO)

(Top Pick Feb 25/16, Up 42.24%) He does not expect this kind of run in this time frame, but he looks for undervalued opportunities. MFC-T was unique in that they had a rough quarter and yet still increased their dividend. Rising interest rates and a steeper yield curve really benefitted them.

The 35-year run in the bond market is drawing to a close. All insurers are very heavily exposed on their balance sheets and through their general funds to fixed income securities. Whether mortgages, publicly traded bonds, private loans, etc. They’ve managed to claw and scratch and make money in a very repressive interest rate environment for many years. With rates backing up, it should be a tremendous boon to profitability. Trading at 1.25X BV so it is not expensive. Dividend yield of 2.97%. (Analysts’ price target is $24.92.)

This looks like it has decent earnings growth into 2017 off of 2016. It has had a big run with the Trump rally, but remember all these life insurance companies fare a lot better in a rate environment where rates aren’t at zero and the curve isn’t flat. It should continue to do better here. There is nothing wrong with this company.

It has a strong correlation to interest rates and equity market returns. In the near term you could see headwinds from toppy equity markets. It is not the sort of thing he would own.

$34.34 is the model price, a 41% increase from here. It will go substantially higher if interest rates go higher and it is lagging SLF-T right now.

In the short term, they are going to do well because of their wealth management business and rising interest rates. Longer-term, the money coming out of the life insurance side, the cash flow, is being reinvested into life insurance businesses in Asia, which is the only growth market in life insurance that there is. He will be buying this for new clients.

If you look south of the border, all of them looked the same since Trump came into the picture. This has had a big run. He would not be a buyer here. If the volume is going to stay as heavy as it has, then you could continue to hang in. He would consider taking money off the table.

This company really relies on interest rates and the direction of the stock market. With those 2 things going in its favour, it is looking pretty positive. In the short term, he took some profits on some of his financials, particularly in the US, and since the election. Some had run up 25%-30% in 3 or 4 weeks. Financials will either flat line from here or go down a little, but as we move through February, we should start to see an uptick. Seasonally in Canada, once they have done reporting in December, they tend to come off a little. This has held pretty well, so he expects any correction is going to be short and sweet. It is after that that he would be concerned.

5-year hold?You are not going to have concerns about this company. They are growing their asset management business significantly. If you are a dividend investor, you want to be in some names that are interest sensitive, and the lifecos are interest sensitive names. Prefers Sun Life (SLF-T) whose footprint into India has been very successful, and they are now moving into China. However, both are great companies.

The life companies get a tailwind out of rising interest rates, so they are beneficiaries. This could go on for some time. If Asia continues to come into them, they are big there. Thinks you could get a lift to the $30 mark.

(A Top Pick Nov 13/15. Up 20.97%.) Has been a long time admirer. Particularly since the financial crisis, they have done so much to restructure the company and de-risk the balance sheet, changed the product mix so it is not quite as sensitive as it used to be. It should benefit from rising interest rates. They are very well positioned, not only in the US, but have expanded significantly in Asia. Sales in Asia have been doing extremely well. This could be just the beginning for them.

(Top Pick Jun 22/15, Up 8.56%) It has been a painful investment. Their businesses in Asia are doing well. He does not want to sell but it is a bit pricey to buy it right here.

Alongside the banks, the insurance companies have been forging ahead quite well. It would be an expectation that if you’ve got better markets, either in interest rate instruments or in stocks, then a company like this earns more money on its premiums. There is a certain safety here.

Great West Life (GWO-T), Sun Life (SLF-T) or Manulife (MFC-T)? He has quite a bit of exposure to life insurance right now through Manulife and Sun Life, and they both look very attractive. Interest rates are likely going to work their way slowly higher over the next several years. He would also consider Prudential Financial (PRU-N), which looks very attractive. The rate structure in the US is probably more bullish for the insurance companies, than the rate structure in Canada.

Great West Life (GWO-T), Sun Life (SLF-T) or Manulife (MFC-T)? This depends on quality and size, but if you are thinking of just keeping it very safe, Manulife and Sun Life would be the 2 he would zoom in on. The biggest difference between the 2 is their global exposure. This one generates about 30% of its revenue in Asia, which he likes. Asia is becoming wealthier and older very quickly, and this one is well positioned to sell products and services. They’ve also done some key acquisitions which gave them a long list of instant clients. They’ve also transitioned from being an insurance heavy business to more on the wealth management side.