Sun Life Financial Inc (SLF.TO)

SLF-T vs. MFC-T. SLF-T has done well, and then pulled back recently. He would prefer MFC-T. The life insurance companies would be a slight preference over the banks.

Doesn’t own any insurers. However, long term, the Canadian insurers have been good businesses and have done quite well. Trying to figure out earnings, etc. is very difficult. A lot of these big financial institutions are big black boxes, and you don’t really know what is inside. In financial investments, you are probably better off with US financials.

MFC vs. SLF-T (Market Call Minute) MFC-T is her preferred because it is at a lower multiple. They can improve their ROE and garner a higher multiple.

He has nothing against them. He prefers POW-T. SLF-T should benefit from higher interest rates. A 5% dip may be a buying opportunity.

Lifecos? He owns Sun Life (SLF-T) and Manulife (MFC-T). The problem with life insurance companies, especially when interest rates are getting so low and negative, how do you fund long-term liability? That has been a conundrum. When there started to be a turn in interest rates, suddenly lifecos became more interesting investments, and he added to his holdings. Because of the big move, he has taken a bit of money out recently. He likes their growth, but valuations are at the higher end and expectations of higher interest rates are a little too bullish. He would recommend that you take some profits like he did.

(A Top Pick Feb 3/16. Up 39.57%.) This is one of those companies that has benefited greatly by an increase in interest rates. Also, they have become very big in the money management business in the US.

(A Top Pick Dec 4/15. Up 18.16%.) One of the best managed life companies. They are in the UK, the US and they have some far East stuff.

Good management. If this gets under $50, it would definitely be on his list. Dividend yield of 3.32%. (Analysts’ price target is $54.82.)

He likes insurance companies right now. In an environment where we are more likely to see interest rates going up, insurance companies generally do very well. You want the ones that are geographically diversified and product diversified. All of them have really gone the other way for the last few years to de-risk their balance sheets and come up with more products that are less market sensitive. This one is a little bit pricier at the moment, but does pay over a 3% dividend. (See Top Picks.)

This has been consolidating, and it comes back to all the rising rate situation. He has been reading that under the Trump administration, if there is a corporate tax cut of 20%, this company’s exposure could result in a 6%-10% rise in earnings. Dividend yield of 3.22%. (Analysts’ price target is $54.63.)

This had a big pop post the election. Reasonable multiple. Lots of growth opportunities internationally. Very well-managed company. Rate increases are very positive for this industry.

Manulife (MFC-T) or Sun Life (SLF-T)? As interest rates started going up, they have done well in the last little while. To him, this one is much more stable. They’ve had some restructuring going on. Although their asset management business has lost some assets, it is a very strong company and is much better than Manulife’s asset management business. They’ve had the ability to reprice some of their products which is going to help them on the margin side. With rates going up, it totally benefits them. This is a much more stable company and less volatile.

He owns this, but also owns a smaller position in Manulife (MLF-T). Likes both companies because the life insurance business is a cash flow machine. They have expanded into Asia, as well as into Wealth Management. Both companies will do well because of rising interest rates.

He is positive on this. As rates rise, this benefits some of the financials, but it really benefits the life companies.

With rising interest rates, they can start matching their assets and liabilities without having to go out 50 years on the yield curve to get a 4% return. He prefers this over Manulife (MFC-T), because they have more efficient businesses and are doing a little better overseas. Dividend yield of 3.2%.