Manulife Financial (MFC.TO)

(Top Pick Sep 9/14, Down 4.16%) She still likes it. The decline is because of the general market and it has actually held in relatively well. They have done 3 transactions in the past year. They started to raise their dividend last year and that signals stabilization in earnings. ROE and Book value will continue to grow. They have good exposure in the US and in Asia.

Has good valuation and scores in the top 20% for him. Price momentum, despite its check back, is actually holding in pretty well. Scores in the top 70% for him. Reasonably valued and has a good yield. Will benefit from a rising rate environment. The kind of stock you can hold for the longer-term.

Canadian and Asian operations are about the same and their largest operation is in the US. Considering how weak and volatile the market has been, she is really not sure whether Yellen in the US will raise rates or not. At some point we will see higher rates in the US. (She is avoiding owning Canadian stocks going into the election, just in case the Cdn$ gets hit one more time.) Dividend yield of 3.34%.

(A Top Pick Sept 23/14. Up 1.11%.) Things are performing well on the operating side. They have the Asian unit which should do well. They are in the UK, in the US, and big in Canada.

Down 21.3% from its high, well beyond the decline of the TSX. Growth rate and consensus earnings per share is 19% this year, 16% next year and 13% the year after. A far greater discount than it should be. Its 3 major divisions are Asia, the US and Canada. Asia, 27% of its business, is up year-over-year at 23%. Wealth management, 33% of the business, is up 31%. Canadian business is 33% of its business and is up 31%. US is 36% of its business and is up only 1%. Dividend yield of 3.49%.

In general he likes the Lifecos, and a lot better than the banks. Prefers Sun Life (SLF-T). Doesn’t own this because the old Manulife was extremely highly levered towards markets, and now they have gone the complete opposite and deleveraged, so they don’t have much leverage any more. Their US operation is not as well run as one would hope. Long term their China exposure is going to be a good place to be. (See Top Picks.)

Just bought some today. When you look at insurance companies, particularly this one, it benefits from the series of things. 1.) A very strong asset management franchise. 2.) It has a very large International exposure, particularly in Asia, so it is growing fairly rapidly. The insurance industry is relatively new to many parts of Asia. A well-run company.

He takes the approach of buying a full basket. He thinks SLF and MFC are the best in the sector. He has been adding to it in the portfolio. Dividends can increase over time and hopefully share prices follow.

This makes sense to own as part of an overall portfolio. You are getting a decent dividend to wait. PE is not out of line. This has become considerably more defensive since 2008 and has transitioned from being insurance focused to the wealth management side of things, a more conservative way to rely on revenues. Well-established in Asia which is where he feels growth is going to come from over the next decade.

What does he think of floatingt rate funds such as Manulife Floating Rate Senior loan fund for the fixed income protion of a portolio? He likes these in general. He endorses the IA Clarington Floating Rate fund and the other is the Mackenzie floating rate fund. They are a form of inflation protection.

In spite of being a free cash flow generator, they have a 9.7% free cash flow yield. The challenge is that earnings growth is like watching paint dry. The most recent 4 quarters was down 11%. The upcoming quarter is expected to be down 7%. Year-over-year, 2016 earnings are expected are to be down 1%. 2017 looks a little rosier provided they can deliver. Earnings are expected to grow 16% against an 11PE, which is a little more realistic. Thinks the stock will mark time or decline as people end up looking for an alternative.

Manulife (MFC-T) or Toronto Dominion (TD-T)? From an insurance point of view this is the best in class. He likes the way management has separated out the core earnings side of things. He thinks they are selling more insurance and have a strong goal and how much they want to sell. They are growing in Asia and have a US component. Both are good names.

Since the financial crisis, management has done a wonderful job of de-risking the company and making it less dependent on market trends, generating more fee income and turning it more into a wealth management company. Has opertations in Canada, the US and Asia. The operations in Asia seem to be growing quite rapidly. Recently paid about $1.2 billion up front for long-term distribution of products, which is going to serve them well in years to come. Will do very well with interest rate hikes, and he expects more dividend increases over the coming years. Dividend yield of 2.99%.

Has pulled back in the last little while. Raised the dividend once and has pretty good earnings growth, particularly from Asia. It is a net beneficiary of higher rates. Given the multiple and the growth, he thinks this is a $25 stock in one year. With the dividend, that would put you in double-digit returns.

(A Top Pick Aug 22/14. Up 5.99%.) Likes this a little better than Sun Life (SLF-T). It has all the drivers you want in this type of market environment. Benefits from raising interest rates. Has exposure to the US and Asia. Going forward, they are set up well and management has been working very hard to grow their core earnings. (See Top Picks.)