Sun Life Financial Inc (SLF.TO)

(A Top Pick March 17/17. Up 14%.) He likes insurance companies. In a rising interest rate environment, that’s always a good place to be. He could see this taking a pause, because their US MFS holding represents a good chunk of earnings, and that industry is facing fee pressures and is very dependent on asset growth. Also this is a little less represented in Asia than one of their competitors. Targeting 8%-10% growth in earnings over the next few years. Thinks they could make it, but it could be a bit of a struggle. Consider this to still be a Hold if you own it.

(A Top Pick Jan 26/17. Up 4%.) Got stopped out right after he bought this. It got off to a terrible start when it reported earnings in February. It still has a very good turnaround going on in its MFS investment management business.

(A Top Pick Nov 25/16. Up 1%.) He likes this for the hedge against rising interest rates, and it still makes sense. As interest rates rise, fixed income portfolios at this company can do better because they can draw more cash flow. It's cheap on all metrics. 3.5% dividend yield.

They have done really well in Asia over the last 5 years. They have grown it at 30%. He sees good growth there. They have done a great job of getting away from capital heavy businesses into capital light businesses. 12 times earnings, good valuation and a very solid company. (Analysts’ target: $54.00).

(A Top Pick Feb 3/17. Up 6%.) A good safe dividend payer. Has added to some positions. A well-run company. It will do well in a good economic environment.

He likes this over Manulife (MFC-T), because it is basically flat year-over-year. A good insurance business. Their challenge is their US mutual fund MFF which has had big redemptions, because of everybody going into ETF’s. That seems to have turned now. Expects there will be a dividend increase in 2018 along with better results from MFF. Dividend yield of 3.5%. (Analysts’ price target is $54.)

Manulife (MFC-T) or Sun Life (SLF-T)? Insurance companies tend to move up and down with interest rates. If you continue to see the interest rates gradually move up, it will be a positive. ROE’s are decent. Both are benefiting from what is happening in Asia. Both companies are fine.

MFC-T vs. SLF-T. It is a close call. He would have to go with MFC-T because he believes they have more recovery upside. MFC-T has some issues but if they address them they will have more upside.

Sun Life (SLF-T) or Manulife (MFC-T)? In a slowly rising interest rate environment, both banks and lifecos will benefit, and you want to have representation in both groups. She owns 3 banks and 1 lifeco. Both have done well but her preference would be Manulife because of their Asian exposure.

Buy, Hold or Sell? Doesn't own any insurance companies, as he felt that banks would give him a better rate of return. This pays a nice dividend. He doesn't think rates are going to go up aggressively. They’ve all grown their asset management businesses, and most of them are active, so the passive side has hurt them a great deal. A great company, and could probably be a little more international where there are opportunities.

Generally in rising interest environments, insurance companies do pretty well. He also owns Manulife which has outperformed Sun Life in the last couple years, mainly due to the stumbles in their MFS subsidiary in the US. The situation with MFS should improve now and expects to see Asset Under Management increase. Not too concerned about fees contraction as he thinks this one has been doing a good job controlling costs. Expects to see much better results and growth coming from their Asian activities and a dividend increase soon.

Earnings estimates are expected to be $4.32, a 6% lift. That is positive, but not the kind of 15% growth rate that you are looking for in a Dollarama, etc. A great stable kind of company with a very stable dividend. There are better opportunities elsewhere.

Likes the longer-term outlook, not only for the fact that in a rising rate environment insurance companies tend to benefit, but also in the way they have been able to change their business mix over the years, with an emphasis more on wealth management, pension planning and retirements. They are well positioned in the US. This is a company you can be very comfortable in owning going forward.

This yields in the same territory as the banks. He likes the distribution of policies and their investments better than Manulife’s (MFC-T). It has had a good run, but now seems to be stuck here. A good safe stock. 3.75% dividend yield.

All the lifecos will be benefiting from rising interest rates. The amazing thing with this company is that they were never hurt during the financial crisis and never had to cut their dividend. Trading at 11X earnings. Great presence in the US and India. At this valuation with a rising dividend and excess capital, we are undoubtedly going to see increasing share buybacks. Dividend yield of 3.7%. (Analysts’ price target is $52.)