Manulife Financial (MFC.TO)

From a seasonal perspective, this tends to peak at around May, but the best month by far is February, which has an 81% frequency of success over the past 16 years. In April and May, the frequency falls to 50%. This stock had a huge decline today of 5.27%, breaking below its major moving averages. It looks like it is on track to test the February low of $15.32. There could be further downside. There is nothing to suggest that the selling is over.

The insurance companies are held back by negative interest rates. They need rising interest rates. This has been a headwind. He would not look to this name right now. Banks can better sustain themselves in a low rate environment. Don’t sell and jump into a bank, though.

(A Top Pick Jan 30/15. Down 5.11%.) Picked this for its US exposure, and thought it would benefit from the FX and the growth there. Also, for its Asian operations with its growth. He is still very constructive and likes the name.

You have seen Canadian banks go up, but Canadian insurers got left behind. Insurance companies try to fund liabilities through their assets, and in a low interest rate environment, where you have equity market volatility, it becomes much more difficult to do that. Ideally you want interest rates and equities to go up. He likes the insurance companies here, but thinks you are going to be restrained by the direction of interest rates.

(Top Pick April 28/15, Down 13.71%) Management has done an extremely good job. They have re-aligned the commissions they pay. It is selling at a very good multiple, at basically book value. He would call it a buy today. It is a good insurance company to hold on to.

It has been a tough place to make money. They did a good job of getting into Asia, who are getting older and wealthier quickly. There are lots of good things going on. He never bought it because he finds more attractive places to be in the space. It has been in the penalty box since they cut their dividend. There are better places for capital.

A huge financial company. They reported recently and had a crushing top line miss. You cannot suckle on resources as long as we have and not expect some sort of blow back. Look beyond some of the big banks. He likes LB-T.

On fundamentals, the challenge is that there is a little bit more time to go in this low rate environment in Canada, and that is not good for their industry. The upward trend line was broken in 2015, and the chart is now showing a couple of lower lows.

The last earnings report was quite a disappointment. He has been neutral to negative on this company for some time. They keep missing their objectives and did some write-downs. One concern is that a lot of their growth has come out of Asia, particularly China, and the situation there is a bit murky. Prefers Sun Life (SLF-T) or the banks. (See Top Picks.)

This is a tough call. If you are bent on owning an insurance company, this is probably one of the better ones. Have good assets, a good insurance book and good exposure to equity markets. They lowered their risk profile from 2008. Also, relatively cheap. The bigger concern is whether you should own an insurance company or not. They are heavily leveraged to the interest rate cycle, and every year we have said interest rates have got to go up, but instead they have come down. It’s a slow growth economy, so there is no need for higher interest rates. You are better off with Canadian banks which are cheaper.

Sun Life (SLF-T) or Manulife (MFC-T)? A hard choice. He owns Power Financial (POW-T) which owns Great West Life (GWO-T), because he likes the additional assets they have. There is a bit of a feeling that the insurers may be a better deal than banks with the banks having to shore up their loan loss provisions. Would probably rank this as a tie between the 2.

He has watched it for a long time. Over the last three years the insurance businesses had one more point in multiple than banks. The multiple is now below the banks and below 0.8 times book value. Headwinds are priced into it now. They will benefit from the US economy.

Long-term Hold? Thinks most financials in Canada are fine longer term. The question is, what is going to happen in the next 6-12 months. This is quite a bit from its highs. In the near term you are really going to have to look at where interest rates are going in Canada. He would choose Sun Life (SLF-T) over this.

In the doghouse having taken hits from the decline in energy prices, a lack of a rise in interest rates, as well as the volatility in equity markets. It would be nice for them if all 3 were improving, which he thinks they will. Wealth management and insurance are booming in both Canada and the far east. The US is more difficult, but they are working on that.

Safe dividends? In his opinion, financial dividends are all safe. Banks have never cut them ever, and he does not foresee this company cutting theirs. This is a stock that got pretty toppy at around $20. Had a great run to there, and now we are looking for levels of some sort that we could hold onto.