
TSE:SLF
This summary was created by AI, based on 9 opinions in the last 12 months.
Sun Life Financial Inc. (SLF) has garnered mixed reviews from experts, reflecting a blend of cautious optimism and concerns about its business model transformation. Originally focused on Canadian lifecos, the company has shifted towards mutual fund management, attracting criticism for taking on increased market beta. While some analysts acknowledge positive aspects, such as the potential benefits from rising interest rates and a robust money management division, others express concerns regarding recent challenges in asset management and the entry into private credit markets. Fundamentally, SLF trades at a comparatively lower P/E ratio than Canadian banks, but experts note that the growth rate remains modest. Overall, while the stock has rallied recently, many experts advocate for a cautious approach towards new investments, balancing potential growth against broader economic risks.
Financials are a theme we are going to be focused on for the next number of years. Insurance, banking and investment dealers all do well when long-term rates are rising. We turned a long-term corner on interest rates at the beginning of last year, and reversed a 30-year trend to lower rates. This is not going to be a straight line. You own this because you like their asset management and wealth management businesses. In the last couple of months, long term rates have pulled back a little, so the whole insurance sector has been under some pressure. He prefers Manulife (MFC-T) from a technical perspective, as well as some US companies. However, you should do well with the whole group.
This has had some struggles lately, mainly with its asset management division. Institutional money and redemptions have been fairly high for several quarters. All in all, it has been a pretty bright light for the company, which is sort of a surprise. Eventually it will get back on track, but it needs that catalyst to move higher.
This is a good Buy at these levels. You could buy some shares, continue to hold it and collect the dividend, and on any weakness you could re-buy. Interest rates are expected to go up twice more in the US this year, which would generally be positive for insurance companies. He prefers Manulife (MFC-T).
As a sector, he likes the insurers. As interest rates move higher, equity markets rebound and the economy generally rebounds, insurers make a lot of sense in a portfolio. He has just bought this on the back of this recent downturn. Trading just above the 200-day moving average and it pays a nice dividend of 3.5%. Expected to grow their dividend by over 10% a year, which is important in a rising interest rate environment.
Life insurers, by virtue of how their balance sheets are set up, own a lot of bonds. A rising rate environment is good for them because as bonds mature they can be reinvested to generate higher coupon increments, which helps profitability. He prefers Manulife (MFC-T). Lifecos had a very strong rally into the 4th quarter, and then they faded. The pullback probably makes these buyable.
He likes the insurance companies in this environment. Life insurance companies tend to do particularly well in any sort of rising interest rate environment. This has significant operations, not only in Canada, but also in the US, UK and Asia. Very well positioned to increase their ROE over the next couple of years. They have a target of 12%-14% ROE, which he believes they’ll be able to achieve. Dividend yield of 3.4%. (Analysts’ price target is $54.)
With 40% of its revenues coming from the US, this will benefit from proposed deregulations and tax reforms. Rising interest rates will help this. Lifecos will also benefit from aging demographics. Dividend yield of 3.39%, which he estimates to grow by about 10% a year for the next few years. Trading at 12X forward PE, which is pretty cheap. (Analysts’ price target is $54.)
He owns this for several reasons. They have the US asset management business, and the US markets have been doing well, so that bodes well. Extraordinarily well managed. In terms of product offerings, they are better than some of their competitors. Profits have been up over the past year. Reasonable yield. (See Top Picks.)