Manulife Financial (MFC.TO)

Had a nice run recently and he thinks this will continue. This is partially to do with realization that post earlier returns can get better if you have a little bit of interest-rate movement and no other problems. He can see it gradually continuing up.

You are in the sweet spot with all financials. With this one he has a coming out of the blue strategy. This one came out of the blue some time ago. He would still buy it or hold it. Model $20.04. Yield of 2.9%.

Lifecos have had a good run because of the interest-rate rises. It is now approaching the resistance level of about $19-$20 and his concern is that a lot of patient investors will be selling their holdings once it gets close to that level, it will be hard to break through that resistance. Watch to see if it can break through that level and if it can, that is a very positive sign. If it gets turned down, it will have more trouble breaking through. Seasonally, lifecos have a similar seasonality to banks but, when interest rates are changing the way they are, it can have a different impact.

Insurers have had a big run in the last little while and even in the near-term. This one is showing a pretty high relative strength index, so it is quite overbought at this point. He would prefer it at $16-$16.50 level. Likes Sun Life (SLF-T) a little bit more whose dividend is a little bit greater.

Coming into some old levels of resistance (2011) but basically the trend has been good. The chart shows a classic break of resistance at $14-$14.50 area. It broke and then it tested. Stock looks good but is probably a little ahead of itself right now and it probably needs to pull back to the trend line. If you don’t own, he would wait for a little bit of a pull back.

Unfortunately, stock has had a very nice move over the last 3 or 4 months. Still doesn’t think it is too late. One of the reasons it has come back is because of increased interest rates. On the equity side, they have been able to take some advantage on the rising market in getting their equity portfolios back up but have also taken the opportunity to hedge some.

This is one of the beneficiaries of higher interest rates. The valuation of the liability pool gets less as interest rates go up. It is not as risk-free as you think. They were exposed to the equity market but took some of that off the table to survive. It is a stock to be in when everyone thinks interest rates are going up. Prefers SLF-T

(Top Pick Sep 11/12, Up 47.71%) They hedged a lot of their problems with the markets. One can see earnings getting back and going higher over time. He has to buy things when they are cheap and out of favour as long as he thinks they will come back.

Coming out of the blue in his blog $18.18 model price. As interest rates move higher they will do quite well.

Biggest beneficiary of rising interest rates. Next 6-12 months he doesn’t think interest rates will normalize, but if they did it would be a good buy. Don’t chance insurance companies here.

Was stunned to see a report that there is a huge increase in short interest. Maybe US hedge funds are doing the same thing as they did to banks. He likes conservative banks.

He is more interested in TD because of 10 times earnings vs. 12 times earnings with MFC-T.

Any time this company can issue an earnings report that is not convoluted with all kinds of footnotes, you have to like it. Came out very clean last quarter. Companies like this will do very well in a rising interest rate and rising stock market environment. Pays a great yield.

Rising interest rates are good for insurance companies, falling equity markets are bad for them. Doesn’t think there is a material downturn (i.e. ~20%) in the next year, though.

Has pretty good wealth management exposure. Some capital should get freed up. You should see substantial improvement on ROE in the next few years.