Manulife Financial (MFC.TO)

What is holding the company back is the structure of interest rates. At these kinds of levels, when you’re trying to write a long-term retirement policy and all you can get is 2%, it is tough to make any money. This is the kind of company that will do very well if and when interest rates rise.

This would be a reasonable entry point. If you are of the view, which he is, that things are getting better in the economy, one of the things that do well in a rising economy is financials. In lifecos, your liabilities are discounted at a higher rate. They also do well in the asset management side of the business. Growth gives them opportunities for acquisition as well as expansion of their businesses. This is very big in Asia which continues to be a bright spot for them. Good name.

Recently switched his holdings into Sun Life (SLF-T). Feels both of these companies are very well positioned and will be benefiting from higher interest rates.

All lifecos benefit from rising interest rates. Thinks this will do better. Had a terrific move in 2013 because of rates lifting off their lows. When you get the US long bond in the 2.5%-3% range, you will see a lift off in the life insurers.

They have done so much to de-risk their balance sheet and to change the structure of the products that they sell, to be more profitable and less capital markets related. Have built a very strong balance sheet and one of the best capital bases in the industry. Have undertaken some tremendous growth initiatives in Asia as well as the US. Recently made a distribution deal in Asia. Have become very long term in focus and the ROE is improving, which he expects is going to be over 10% going forward. Yield of 2.8%.

He likes both MFC-T and SLF-T. He prefers lifecos over banks in Canada. MFC-T has taken down the sensitivity to the market. They are in line to hit their 2016 targets that they set a couple of years ago. The core businesses of both companies look good here.

Sees 16% in earnings growth over the next couple of years, along with 14% dividend growth. They just combined with an Asian bank to get exclusivity on insurance products. Have stumbled over the last couple of years. EPS has been missing on the core earnings, but they are on track for their 2016 plan. When interest rates go higher, this will be a beneficiary.

Low interest rates creates a real challenge for lifecos. This one has done a good job of transitioning from an insurance company to being more of a wealth management name. Their US wealth management is about 40% of their overall revenue. The real opportunity for them is in Asia and they have positioned themselves well to really compete in that space. He is looking at this name. 2.8% dividend yield.

Thinks they are really position to grow their ROE and their Book Value. These are 2 really important metrics she looks for in a lifeco business. Have done a series of transactions, which underscores management’s focus on long-term growth. Yield of 2.8%.

Internationally oriented and exposed. He likes to see operations that are more centred in North America, or even Great Britain and Europe. He would rather go with Canadian-based insurance companies.

It has been outperforming the financials since 2013.

(A Top Pick March 12/14. Up 4.58%.) He would have thought it would have been 10%. This is a beneficiary of higher rates, and this is why it is kind of flattish. Now that it looks like we are finally going to get higher rates, he expects the stock will end up at $24-$25 a year from now.

In lifecos, this would be his favourite. It has the best growth including Asian growth. The catalyst will be that their spreads will widen as rates go up. They are not as sensitive to others as they hedged out in 2008-2009 when rates hit. Starting to give dividend increases which will become more regular. This will give you 8%-10% returns instead of the 5% that we have had.

Every year we think interest rates are going up and then they don`t. The insurance companies have these guaranteed products from `08. She likes this one and the banks as well. This one is in a holding pattern.

Has been pretty frustrating with some pretty big swings between $19 and$22. These business models want 2 things to happen. 1.) Interest rates moving higher and 2) the stock market moving up. These are the 2 biggest inputs.