Manulife Financial (MFC.TO)

Has performed pretty well over the last 18 months and still has a fairly nice yield. Just bumped the dividend last quarter. Trading at a pretty reasonable multiple. This would be a benefactor of higher interest rates. Likes their international exposure. 2.8% dividend yield.

This is not a good seasonal time for them. It is outperforming the market, in an upward trend and above its 20 day moving average so one should hold it.

In terms of valuation versus growth prospects, he feels this is a better option over Sun Life (SLF-T). It’s a very encouraging sign that they have raised their dividend. This means they are comfortable with their business outlook and their capital position. Yield of 2.79%.

It is a difficult choice between MFC-T and SLF-T. MFC has been doing better later. They are overseas in the far east, but it is hard to quantify profits from this. Thinks MFC is slightly better than SLF.

The biggest factor is the shape of the yield curve when you compare to banks. Interest rates will be low for a long, long time. Deflation is the bigger risk than inflation. If the yield curve stays steep then banks will continue to profit from it, not insurance companies.

Not expensive. Trading at 10X earnings. Increasing their dividends which is great. When you look at the numbers and delve into it a little bit more, the financial side did well, but their insurance was down a fair bit. With interest rates being so low, it is hard for them to make a lot of money. He would prefer owning at bank instead.

They benefit largely from better equity markets and higher rates. Also, have a lot of exposure to Asia, which has been quite good to them over the years. Importantly they are improving on what is happening to them in the US. Made big investments there. Stock has been stuck in the low $20’s for quite a while and is looking more appealing to him.

Prefers Sun Life (SLF-T) where the quality of the company is higher and the quality of their earnings is less risky. This one was a lot more risky than the other lifeco’s, and still has some of that.

Trading at a Price to Book of around 1.4% and is on track for its 2016 targets, and he sees them growing their annual compound growth rate and operating earnings at 19% over the next 2 years. This is a name for the future.

Stock vs. Stock. MFC-T vs PWF-T. He likes both and holds neither. His preference is MFC-T at this point, but insurance companies could be impacted by interest rates staying low for a long time.

One of those companies that can benefit from a rising interest rate environment. The only thing that has kept him away from this company has been the comparison of its valuation multiple relative to the multiple of the banks. The banks actually work out cheaper. While interest rates are still low, there is more leverage to generate more cash flows from a bank than a company like this.

There are 2 major things that make insurance companies move upwards. One is an increase in interest rates, which he thinks is in the not too distant future. The other is stock prices and stock markets going up. This is a good time for this company. Tremendous restructuring a few years ago. Pays a lovely dividend. If he owned, he would wait for at least $25-$30 before Selling.

The markets are liking the balalnce sheet. Model price is $26.35, an upside of 23%. Thinks it goes to $26. SLF-T is right at his model price so he prefers MFC-T.

Have been doing very well and have turned the ship around, but he is not happy that 35% of their actual earnings are coming out of the Orient, mainly China. He gets nervous about companies that have a lot of money coming from foreign sources. Would rather that people make their money in Europe or North America.

TSX Financials are beginning to peak. This is a component of that group. The 3-year comparison chart, between this and the financials, showed that the company started to close the gap in 2012, and ran close together in 2013-2014. A one-year view showed that it was quite choppy from January to April, and Manulife broke down below the TSX financials and is starting to work lower. Be cautious.