Manulife Financial (MFC.TO)

They are levered to rising interest rates and stock prices. The move down in rates is going to hurt them in the next quarter but he is looking for a rise in interest rates longer term. Likes their global footprint and how they are growing. Would put them at the top of the list and you may want to start adding insurance companies back shortly.

(A Top Pick May 31/13. Up 27.01%.) Lifecos, because of the long-term bond yields last year, were big out performers having underperformed the banks for a long time.

(A Top Pick July 30/13. Up 14.66%.) Had thought interest rates would be a little higher than they are.

Had a pullback as bond yields continue to drift lower. Although bond yields may drift a little bit lower, she thinks they are going to turn around as we move into the back half of this year. The last couple of quarters have had decent growth in core earnings. On track to meet their 2016 target. The Asian business provides a good platform. Wealth management is a pretty big piece of about 40% of the underlying operating earnings. Yield of 2.59%.

Sensitive to higher interest rates so is definitely coming down a little bit with rates migrating lower. Bear in mind that insurance companies takes a lot of the premiums and have to deploy them so if they have to go into a lower interest rate environment, their underlying profitability is less. A dividend increase is not too, too far away. Sees good momentum in their John Hancock operations in the US. Also, have a good beachhead in Japan. Good Hold for the next 12-18 months.

Increase in rates and in equity markets is good for insurance companies. It is cheaper than some of the others. Operating earnings came over quite decently this quarter. This also gives you exposure into Asia, a higher growth areas. Not cheap. You are probably going to have lower ROE then you have had in the past because they have pulled back on some of their riskier business. A good holding.

Insurance is a great place to be. Trading at a high price to Book so he prefers AIG insurance, Power Corporation (POW-T) and Power Financial (PWF-T), where you are paying a cheaper price to get good quality assets.

If we see stock markets moving higher and interest rates moving moderately higher, that is a good catalyst for the share price. In addition, the fundamental business is going well, particularly in Asia. If you have a 3-5 year view, this could be a core holding to have. He would like to see it pull back a bit before buying.

Lifecos had a big run up in 2013. A lot of that was multiple driven. We are now experiencing some earnings growth, but there is a bit of a consolidation taking place as 2014 earnings have to catch up with the multiple. It probably will because we have a good environment and interest rates are moving up. He is lukewarm on this and is in the “show me” state. Wants to see those earnings because if he doesn’t, it has run ahead of its multiples.

Bonds. Have performed particularly well for two reasons. Credit spreads tightened and Interest rates are stable. He would not hold bonds with more than 5 years duration. Lifecos perform better in rising rate environments. He wouldn’t put any equities into his portfolio.

They have taken a lot of leverage out of it. From a technical perspective, we see a descending triangle taking place (bearish). Just finished the end of the seasonal period and he sees declining interest rates which are not good. A break down below $19 would show weakness form a technical perspective.

All insurance companies have done well with the falling Cdn$ and the improvement in stock markets. Basically insurance companies have to invest in GICs or bonds so if we get the Cdn$ moving down, it is a bonus for them. Dividend yield of 3.54%.

Believes it has pretty nice legs here as well. Could flip flop between this and SLF. Multiple is not screaming risky to him.

Hit $22 in January, but is now hovering around $20, which is not an insignificant correction. Has to do with the market and the underlying returns with some of their portfolios. Their international business is still quite small. They are having a little bit of difficulty with perception, but this is one you want to pick up right here at this price.

Earnings were good and there is a lot of growth in Asia. This is a longer-term beneficiary of higher rates. Their capital ratio is getting up above the upper end so he expects a dividend increase in January 2015. $24 in one year.