Manulife Financial (MFC.TO)

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.

Rotate out of this and into TD (TD-T)? He wouldn't. Because the banks have had such a wonderful move here, he expects there will be some catch up out of the lifecos. If you can see the Asian market improving, and he does, this company has a big exposure there. It should catch up in the next few quarters, and he thinks the banks will more or less go sideways. He owns both.

His FMV calculation should carry quite a bit higher, perhaps as high as $32. Ran into some overhead resistance at about $21.50. He has a fairly safe target of about $26. This is safe and can give you more from here.

It is trying to become less sensitive to rates. Remember that in the 2^nd half of the business cycle, rates tend to rise, which means financials make more money. Lifecos this year have really lagged and she thinks this is going to reverse and they’re going to do really well.

So dramatically turned itself around in terms of de-risking its balance sheet. It has one of the strongest capital ratios in the business. It has done a good job in growth of wealth management. Was hated because they cut their dividend.

Using a chart to compare this to its peers (XFN-T), it shows it has outperformed from mid-2012 until late 2013. We are now seeing a period of underperformance. If you are in this one, you should reduce.

(A Top Pick June 14/13. Up 36.23%.) Feels that a year from now, this could be $25-$26 pretty easily. (See Top Picks.)

Should be a core holding for a number of people. Hedge against rising rates. There is a great asset management angle to them and they get some strong fund flows. Okay dividend, but it won’t go up any time soon. If rates go up it will be a benefit.