Manulife Financial (MFC.TO)

It is an international company and has already been dinged badly from negative interest rates. The business models of insurance companies are coming under severe stress. Prefers US banks.

(A Top Pick Nov 5/15. Down 10.79%.) Bought this for a highly visible EPS growth, high dividend growth and a lower Cdn$ because they have some operations outside of Canada. All of this transpired. Unfortunately, their energy book brought down their book value per share. Also, low interest rate hurt the whole sector. He still models an 11% EPS growth, each year, for the next couple of years, and an 11% dividend growth. Trading at 10.2 versus its peers at 11. The whole lifecos sector is cheaper than the banks. This name can still work.

Too many people are impatient with stocks, so you should go back to basics and ask why did you originally Buy the company. Does your original rationale still stand up? It pays a reasonable dividend. When interest rates go up, which he believes they will, insurance companies should do better.

In a low interest rate environment, it is very difficult for lifecos to make money. Auditors at some point are going to look at the reinvestment rate required, and there is speculation they may actually lower it, meaning the company has to hold more cash on its balance sheet. However, the franchise value is excellent. Great wealth management business. Growing hand over fist in Asia. If they can just overcome the negative sentiment as it pertains to interest rates and maybe start to take a longer term time horizon into 2017-2018, then you can make a case for it.

(Market Call Minute) They are all having difficulty, but MFC-T’s wealth management business is better than SLF-T’s.

He covered his short on this one in the summer. It is going to be "torquey to interest rates". He does not think it is quite a buy yet. However, it is not a short any more.

The difficulty with the lifecos is that the longer it takes for them to normalize interest rates, the tougher it is going to be on them. They have obligations that go 20 years in the future, and have to do an offset. When we go to a more normalized yield curve, that is a bonus to the lifecos. He is starting to lose patience, and might put this one on the boat if rates don’t improve.

A well-run company and well diversified in Canada and the US, as well as Asia. The issue for all insurance companies right now is the very low interest rate. Thinks interest rates will gradually move up over the next few years and their operation will get better. Long-term it is still a good buy, but shorter term you are probably not going to see a lot of upside.

Share price has been disappointing for the last 1-1.5 years. They’ve had headwinds with the energy sector and their bond and loan portfolios. Resolved their problems from the financial crisis and are on mode now to invest and to grow. Hopefully the macro headwinds are now largely behind them. Stock was punished because they missed expectations, so valuations are now quite attractive at about 1X BV. Likes their exposure to the Asian market. She would start buying here on a pullback.

This has frustrated many, many people for the better part of 10 years. They disappointed in the latest quarter with some of their numbers, and they keep writing down assets. They had quite a bit of exposure to oil/gas which hurt them. It is probably going to sit in the $17-$19 range. He is not interested in it.

(Market Call Minute.) He likes the life insurance areas as a value play, but this one is his least favourite company. They seem to have problem after problem after problem.

(A Top Pick Feb 25/16. Up 4.17%.) Still cheap and still hated. In the upcoming quarter they are probably earmarking some costs associated with their revisions with their actuarial assumptions. There are some challenges ahead, but feels that a lot of them are priced in. The dividend is sustainable.

(Market Call Minute.)

The whole life insurance sector has been a troubled battleground, and hinges on interest rates being extraordinarily low. Thinks it is still going to be pretty tough to own this name.

In his ranking system, it is in the 2^nd quartile of all the companies he looks at. Technically, it would rank a lot lower. There are 2 aspects that are going to drive the business. One is interest rates and the other is their Asian business, whose economy continues to improve.