Manulife Financial (MFC.TO)

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.)

He likes this one. You see interest rates go up, this is one of the companies that should do fairly well. Below the market multiple at about 13.5X price to earnings. Dividend yield of about 2.5%.

CEO is doing a great job. This is trading at something like 1.25X Book. He would rather buy Berkshire Hathaway, a Markel, Power Corp. or AIG which are trading at Book.

This has been lethargic. The pace of moving interest rates higher has been slow as the economy sort of trips on itself. If Yellin moves in September, then things will perk up a little, and if she doesn’t, we will be in the sideways doldrums. A lot of good things are happening in this company. They have a large Asian exposure. The business in North America and Europe is solid. Earnings are growing, but not rapidly. The yield is safe. A pretty safe bet for a market like this.

Technically it has a long upward trend. It does have some greater volatility than the banks at certain times. A sign that is encouraging is that it recently broke out to an all-time high. The stock is outperforming the banks and the market, and is showing good relative strength. Going into a summer rally, it is a stock that looks like it has a very good chance of breaking into new all-time highs. Stick with it and buy some more on any kind of weakness.

A high-quality name that doesn’t get the same recognition that it should. Dividend of about 2.75%. On a Price/Earnings basis, it is actually a little bit more expensive than Canadian banks right now. However, a big difference is that they have gone from a period of playing defence for 3-4 years and really cleaning things up, and the last couple of years is really the 1^st time in a while that they have started to play offense. We are now just coming up to the brink where some of that should be accretive to earnings. Also, likes that they have been successful in transitioning from an insurance brand to the wealth management side of things. Also, well-established in Asia. Prefers this over Sun Life (SLF-T).

A good example of a stock that should do reasonably well in a rising rate environment. Lifecos reinvest proceeds from their premiums, and as rates rise they tend to do particularly well in that environment. This also scores well for him on momentum and valuation. A stable stock with low volatility characteristics. PE of around 13%. Reasonable yield of 3%.

A much diversified organization. They stumbled very badly going into the market crash of ‘08. People have a long memory. It has finally gotten back to where it was. How do you invest premiums with interest rates this low. A recent transaction involved Chubb being taken out at a big premium so these insurance companies are obviously considered a lot more valuable than their market price.

Manulife (MFC-T) or Intact Financial (IFC-T)? These are 2 different types of companies and can’t really be compared. This is a life company and the other is property/casualty.

A very established insurer. They should get some strong growth from Asia where they have been for decades. They have a dominant position here as well. A good long term buy. He would add to it with today’s drop.

(Top Pick May 23/14, Up 22.75%) It is in the initial stages of finding a new trading range. Their investor day was very beneficial to the stock. Higher rates would benefit this company. You will have stronger core earnings growth than from the banks. 10-12% growth beyond 2016. She also likes their Asian platform.

It has a low payout ratio and can grow its dividend. A clear driver is the wealth management business. Another is Asia (except China and Japan).

Sees earnings growth of 18% over the next few years. He is seeing really nice growth coming from brisk sales in wealth management. Last quarter was up 97% year-over-year, Insurance was up 42%, Asia was up 15% and 45% of their earnings are coming from the US. This is a name that can benefit from a rising rate. Yield of 2.86%.

Insurance companies have not been particularly good performers as interest rates have slipped. If you reverse that process you see that their margins are widening and there is the potential for more widening of margins and this is what drives the sector.