Manulife Financial (MFC.TO)

Trades at a slight discount to the banks. This is because most of the Canadian banks businesses are oligopolies, which means they are protected. This would explain the difference in valuations. His issue with businesses of this kind is that the growth rate just hasn’t been that great. Within financials, he would take banks over lifecos.

This is his top holding in financials right now. Their restructuring is working out well. Core earnings are closing in and are on target for 2016 to be better than $2 a share. Has a great international diversification. The hedging programs they have had in place have protected investors a little bit more from market moves. There is a benefit for all the lifecos, and that is if US interest rates are to go higher.

If the market goes very strong from here, insurance companies do well, because a big part of their business is investing the premiums. Good solid business and pays a decent dividend. This should continue to be a solid holding.

He does not own any of the big lifecos or banks. He calls life insurance companies big black boxes, as no one outside really understands what the earnings stated really mean. This company went through a lot of problems and really got beaten up. He thinks they have stabilized and are moving things forward and have some momentum with the wind behind its back. He would actually prefer this over some of the Canadian banks.

Very well-run. Have their Book Value and Capital Reserves in order. A great stock to have. The question is, when do interest rates re-normalize.

Prefers Sun Life (SLF-T), but right at the moment, they are both running and look cheap. Yields are okay. This one looks like it is breaking out, so from a technical standpoint you could go to either of these and make some reasonable money. Since the banks have backed off and not left many choices of where to go for yield and relative safety, insurance companies look pretty good at the moment.

He owns SLF-T which is a lot less volatile and the quality of management is better. MFC-T has more exposure to the US and that adds to the volatility.

2.5 years ago this traded above his EBV -3. In his blog, he said that both this company and Sun Life (SLF-T) should be bought. His model price is $25.23, an 11% upside. He thinks it goes to $27.40 quite easily. However, if you are looking for real value, he likes Hartford Life (HIG-N), which just came out of the blue.

Ran up quite a bit because the outlook for interest rates going higher was positive. He thinks they will stay low for decades, however. Growth is going to be below average and interest rates need to stay low so it should underperform for a while. It had a good run so he would say to take money off the table.

Had been very concerned about the outlook in 2009-2010, so sold his holdings. Now regrets that. The one thing that is working in their favour is that the stock market is doing really well. If interest rates do go higher, that would be even better. US insurers look more attractive to him on a valuation basis.

Good investment. Just poking above the early highs that were there at the beginning of the year. This needs a stock market that goes up, and they need rates to go up. The markets have been good even though there has not been a rise in rates. This looks like a pretty good place to be.

Stock vs. Stock: MFC-T vs. SLF-T. Owns MFC-T and not SLF-T. MFC’S growth over the next 3 years is higher in each year over SLF-T. MFC-T’s PE ratio is slightly higher. SLF-T is a great company and has been outperforming MFC-T but going forward MFC-T can pick up their business. With their growth rate in Asia and in asset management, they will do particularly well.

Manulife (MFC-T) or Canadian banks? He has both. However, if it came to one or the other, he would be inclined to go with Manulife right now. The bank sector valuation is at a very high level and earnings growth is slowing down. Feels the housing market in Canada is a little bit riskier than it is in the US. This company has done restructuring and have got their balance sheet in better shape.

Doesn't think this is fully valued right now. They have a very, very strong balance sheet. Required capital is 248%, one of the highest in the industry. Since the financial crisis, they have really de-risked their balance sheet to a great extent, changed their sales mix into products that have more predictable profitability, gotten out of a lot of the market sensitive products. Extremely well-managed. Expects you could see upside from here. Wouldn't be surprised to see the dividend increased in the next year or two.

Insurance companies are a good investment. When stock markets or interest rates go up they are a good investment. Markets are going up and interest rates will at some point. At this point it is too expensive for him, but that does not mean it will not go up from here.