Manulife Financial (MFC.TO)

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.

One issue he has with the sector is they are not as cheap as the banks and don’t pay as high a dividend. The low interest rates hurt these guys. Stay out because they are fully valued.

It has been in a trading range for the last while. You want to watch it and if it gets above the resistance level, it could indicate we are in for an up-leg. It is early from a seasonal point of view. Hold until Feb and then add at that time.

Just acquired some US assets and he is very bullish on the US. He likes any financial institution with a major US asset exposure. This is his favourite insurance company. Slightly overbought. The market could go sideways and work off the overbought position.

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.