Manulife Financial (MFC.TO)

This is under a lot of pressure. The interest rate scenario is obviously not positive for insurance companies. The CEO wants to get the company up to $4 billion in core revenue, and right now they are at about $3 billion. They are going to need a lot of things to go right in order to get the last billion dollars squeezed out. He is right on the edge about being nervous in owning this name. 50% of their revenues are coming in from abroad including the US and Asia. They need a better market and they need rates to go up for them to do much better from here.

October to December and February to May are periods of seasonal strength. It tends to go lower in January. Hang in there. Buy on weakness until part way into February. The trend is mixed, near its 20 day moving average and it is outperforming the financial services sector and probably the Canadian market as well. It is getting lined up.

He likes SLF-T better. The decline in interest rates really isn’t a problem. It is good for the Canadian economy, however.

Both this and Sun Life (SLF-T) are quite interchangeable. With Sun Life you are getting a little bit higher dividend. Longer-term both insurers will do quite well as will Great West Life (GWO-T). They tend to do well with rising interest rates and rising equity markets.

This will be negatively impacted on the spreads by the lower interest rates, but probably offsetting it is 275 points upwards on markets, and maybe markets continuing net higher over the year. He likes this company. Has really good Asian growth. Has pulled back lately with the softness in Canadian financials. Has a $25 target.

Recently sold his holdings. Compared to Sun Life (SLF-T) he thinks this is in the better space. Have had a drastically different management team since the Delasandro days, and basically made the company more conservative. On earnings calls, this is a core focus and then you have the investment side. They are pushing into Asia, which is certainly a driver. However, the bond yield side of things, over the past 4 months has definitely been an overhang. His preference would be this company over Sun Life. It is on his radar screen.

Has done a better job of shifting revenues from insurance to wealth management. He likes wealth management revenues because they are re-occurring and provide some stability in the income stream. They also did a nice acquisition last year, buying Standard Life, which deepens their group benefits exposure. Most importantly, this company is well positioned in China, and he feels the middle class in China will continue to grow.

Thinks insurers are going to do reasonably well. If you were to take your profits and move, he feels the smart trade would be to a bank. Watch the relative valuations until you see a moment where there is a bigger advantage to move. Both are good, long term values.

At this point in time, it is probably too early to know if the pullback is warranted or not. If this is just a midcourse correction, it has probably pulled back for no particular reason. This had a great turnaround over the last couple of years. Stronger equity markets have certainly helped them and if equity markets are heading south, then the stock price is probably going to follow suit.

Well diversified geographically, via their John Hancock holdings in the US and a very strong presence in Asia. The big issue over the years has been to de-risk, which he feels is largely completed. Looking at 12%-15% earnings growth going forward. They are really relying on their wealth management division as their key growth platform going forward. A fairly good bet that there will be dividend increases.

Manulife (MFC-T) or CM (CM-T)? Could the dividend be cut? He doesn’t see how banks are going to cut the dividends. The big concern for banks is if you have a cascading housing collapse or a deep recession. Demographics make sense. Canada’s population is growing. Interest rates are very low. You should own both of these in your portfolio.

When you are given an opportunity when a stock pulls back for you, you should take advantage of it. Has a good yield of 2.91%. Lifecos look better than banks at this time. If there is a lift in interest rates, there are a few stocks that might benefit from that, and this would be one of them. Has good exposure in Asia. He could see some dividend increases in the next little while. Have all the ingredients that he likes to see. A solid investment where you will be able to sleep at night.

Not cheap. Model $25.80, above now.

Continues to like this at these levels. Has totally transformed itself since the financial crisis when they had to cut their dividend. Since then they have de-risked their balance sheet, transformed their business and are selling less equity sensitive products. They are less dependent on insurance products and getting more and more into wealth product. Just before Christmas, they acquired the retirement plan services businesses from New York Life in return for New York Life re-insuring a portion of their book of insurance in the US. They are going more and more into wealth management, retirement planning and more fee-based businesses. Yield of 2.92%.

(A Top Pick Dec 9/13. Up 13.08%.) Still likes this. Thinks it is very linked to overall stock market performance. Insurance companies are a good place to be within Canada.