Manulife Financial (MFC.TO)

Manulife (MFC-T) or Power Financial (PWF-T)? Power financial is more into Investors Group and Great West Life. Great West is basically health benefits and the demand is there, so it is inelastic. This company is in life insurance and other things that are little bit riskier. He prefers Chubb Ltd (CB-N).

Prefers Sun Life (SLF-T) because of the better dividend profile and being slightly more diversified. Interest rates have continued to move down, and insurers tend to move with interest rates as well as with equity markets. The dividend of 3.6% is safe. He is underweight most Canadian financials, including the insurers.

He looked at this in 2 areas. One is investments and the other is in their core business of selling insurance. They are having a tough time on the investment side, with corporate bond spreads widening out. This will have a short-term negative affect on insurance companies. However, their actual insurance business is quite strong. Their recent acquisition and exposure in China is quite positive. With the volatility here, there could be a better time to enter the insurance business.

From a valuation standpoint, this looks pretty attractive. Trading at almost BV, so you don’t get much cheaper than that. Has a good dividend. It does bounce around a little. This might be a good place to pick it up. Ranks reasonably well in his ranking system.

It has a better footing in China where they are becoming wealthier and older. Their wealth management side in North America has really grown. His pick would be Prosurance in the US.

This is not a bad time to consider insurance stocks. There is expanding life expectancy, which is good for the lifecos. He would favour Power Financial (PWF-T), but this company and Sun Life (SLF-T) are both good strong companies. They won’t benefit in a significant way until investment returns improve.

(A Top Pick Jan 7/15. Down 8.6%.) Has admired their restructuring since the financial crisis. They de-risked it and changed their product lines to be less market sensitive. They are expanding fairly aggressively. Current price is a compelling place to start to Buy. Basically trading at BV currently.

(A Top Pick Jan 9/15. Down 3.89%.) He is still buying this. If the yield curve can become more normalized, this will be a beneficiary in Asia.

The story remains the same. They are in the business of getting premiums, investing all that money and then eventually paying claims. It is harder when bonds pay 1.5%. They are now buying long term assets like real estate, but they find it hard with so many other investors buying in that space.

He owns MFC-T and PWF-T. MFC has better exposure to higher interest rates. He marginally prefers MFC-T, but you could go with either one.

You play insurance for an interest rate increase. We have been waiting 10 years and have finally got a .25% interest rate lift. Thinks interest rates, beyond a 6 month period, are probably going to go higher. Insurance companies will benefit from this and this is a good one to own. An interesting global play that you can buy domestically in Canada.

A great stock going into the financial crisis, and found itself over leveraged and got crushed. It has come out of that, but deleveraged itself just as interest rates were about to go down, and it might benefit from that. His favourite is Sun Life (SLF-T).

He likes Canadian companies that have growth exposure a broad. This one is very big and growing very rapidly in China. Recently struck a deal with a Chinese financial institution that they can distribute their products through their systems. Their basic business in Canada is doing well and he feels the US is picking up. Dividend yield of 3.34%.

Interest rates are a factor, but a bigger driver to the story is really the asset management side. They have really bulked up in this area, and it gets a tremendous amount of fund flows in. What you have to concern with is how the equity markets do. Dividend yield of 3.3%. From a dividend and a dividend growth perspective, this looks pretty good.

This company should be performing a lot better considering that 45% of their revenue comes from the US and they have a pretty good revenue line coming out of Asia. This is a sort of Hold in his portfolio, and he hopes it is going to benefit from a rising rate environment. It could easily be replaced in his portfolio with something else, when he finds something else.