Manulife Financial (MFC.TO)

He is negative on life insurance. Property and casualty is his preference. But MFC has done well, great franchise in Asia. In this environment he doesn’t see how they make their ROE targets. Maybe own it in 2014.

Got fed up with the potential for their return going forward, which he thinks is going to be restricted because low interest rates are here for years and years to come. You can’t go too far wrong with this because valuation is cheap. Dividend is completely safe. ROE is coming back. Feels there are better opportunities in the financial space.

If you own, you have done very well. However, recently, it broke a support level, established a downward trend and is now underperforming the market. Below its 20 day moving average. Now is the time to take some profits.

Has started to not do so well over the last little bit. Probably because of the great rotation of money coming out of bonds and going into stocks. However, sales growth has been very strong across all regions. Core earnings have been very good. Last quarter was not messy at all. However, they are having higher costs from new business strain. Probably a good buy at these levels.

Several issues with lifecos. With low interest rates, can they live up to their actuarial assumption? Also, exposure to the Europe bond market. Those things are probably behind them now so the question is, are they just good old solid financials now. In his mind, none of them stack up to being as good as the strongest bank.

Has done well over the last 3-4 months as they’ve hedged more and more of their exposure to both equity markets and interest-rates. Unhedged portion is certainly benefiting from the increase in markets globally. Still a reasonable multiple. Feels it is the best run Canadian insurance company. The particular attraction here is their growth in Asia. Dividend yield is modest but relatively secure at these levels.

(Market Call Minute) He owns and prefers SLF-T.

Hasn’t taken a look at this one in a while. The business to him is too complicated to figure out. Now that they have hedged, he thinks they have hedged a lot of the upside in terms of the earnings.

Common or preferred shares? This is contradictory, because you don’t buy preferred shares for growth. The common shares have a decent yield but you get a lot more volatility. You have to decide if you want growth with some income or just your income.

They have reduced their exposure to both equity and fixed income markets. May be fully valued today but medium to long term there is some good money to be made. Good exposure to Asia. Argues for stronger growth.

(A Top Pick Dec 28/11. Up 44.44%.) This was a levered play on the economy. If the markets got better, they had tremendous leverage to the stock market. If the bond markets were to finally roll over, which was expected, they would benefit from that as well. Getting pretty fairly valued now.

In the early stages of a recovery. Stock has performed reasonably well in the last little while. From an earnings standpoint, have really re-engineered its business and gotten out of some of the riskier areas and focused again on growing in Asia and the US. Will return to some normal level of profitability this year, which more than covers the dividend and leaves room for growth. If interest rates start to rise, as he expects it will in 2014, all the lifecos will be huge beneficiaries.

Broader issues that are driving insurance companies are effectively interest rates. Until we see a rise in interest rates, they will constantly be under pressure and it will be hard for them to grow. Longer-term, in an environment where the US improves, more employment is secure, Canada stabilizes and there is growth in Asia, you will see higher earnings and this is a company to buy and hold. There are other alternatives.

Core earnings have been great for a very long time, held hostage by lower interest rates and choppy equity markets. If equity markets improve, that’s going to really help them with their legacy and if interest rates gently push their way up, it is going to make it much harder to roll into the bond market. 3.64% yield.

Doesn’t see any increase in dividends. They need interest rates and equity markets going up. Problem with insurance companies is that they are all leveraged to the upside but have now hedged a significant amount of their portfolios so they don’t have the leverage that the used to have.