Sun Life Financial Inc (SLF.TO)

The period of seasonal strength is the end of August to the end of November. We reached the end of the period. Momentum indicators are still positive and it is outperforming the market. It is a good idea to take money off the table until the end of February. If it got back to $46.50, you could buy it until the beginning of May.

Sun Life (SLF-T) or Manulife (MFC-T)? He decided to get into insurance, because rising rates are beneficial to the insurance business. It is very difficult for them to make money when rates fall, but will be a lot easier as rates go up. Feels there is a better multiple expansion on Manulife.

(Market Call Minute.) A great time to be in financials.

This is a pick more for the exposure than the company itself. Fundamentally he thinks it is going to do very well. They are beating analysts’ estimates. Increased their dividend recently. They are also growing their US asset management business. They have exposure to growing US interest rates. As long as the fundamentals are working out, the interest rate story should also help support the shares. Dividend yield of 3.14%. (Analysts’ price target is $52.05.)

Sold his holdings simply because it took off from their earnings from the election. Trading at $52, with a near 80 RSI, which is overbought. He likes this longer-term, and will probably re-enter at around $48-$49.

Insurance companies tend to have very long annuity books and very long liability books, so if you increase interest rates, they are able to earn higher levels of income on that liability. The expectation is built in that we are going to see a lot more earnings coming off of these companies, which is causing investors to get a little ahead of themselves. The next 4-5 years is going to see a lot of upside for insurance companies, as well as for banks.

It is a solid name. He does not have a position in any of them. But this one would be at the top of the list. He prefers Canadian listed lifecos with US exposure.

The insurance sector is another one of these situations where they want a rising interest rate. This is the only insurance company that he would be interested in. The good thing is that most of the bad news and sentiment in this sector is really all priced in. You are really, truly buying it at a very, very fair democratic price, and you are just going to need the environment around it to get it going.

(A Top Pick Aug 19/15. Down 1.23%.) This needs higher interest rates to do well. It has outperformed other lifecos in that they are also in the money management business. They own MFS Financial and Sun Life Financial. Together they are a big player in the funds management business. Deemphasized their life insurance business they have in the US and are investing a lot in Asia where they are seeing a lot of opportunities and lots of growth.

Sun Life (SLF-T) or Power Financial (POW-T)? You can liken life insurance companies to a swimmer who is swimming up river as opposed to downriver, in regards to the interest rate environment. Financial companies as a whole do not do well where interest rates are generally going lower. He feels interest rates are heading even lower than what they are today.

Great wealth management franchises in Canada and the US. 32% of revenues come from wealth management. It has good dividend growth so he likes it and thinks it will continue to do well.

Great West Life (GWO-T), Sun Life (SLF-T) or Manulife (MFC-T)? As a group, the insurance companies have not done very well. Of these 3, Sun Life has relatively performed the best. A lot of the difficulties they have experienced has been a function of what has happened with energy, as they all have some energy exposure. Also low interest rates are generally negative for lifecos.

(A Top Pick July 31/15. Up 1.29%.) All the life companies seem to be under pressure. This has a reasonable dividend. They are very good in the wealth management business, and they are not in any casualty business. He avoids the casualty business like the plague.

This pays about 3.7% dividend yield, and is trading at about 11-12X PE. Canadian banks give you a similar valuation and also pay a higher dividend. He finds Canadian banks are more attractive.

Relative to the banks, insurance companies are relatively good buys. However, he would prefer Manulife (MFC-T), which you can get at a discount to BV. Sun Life is trading at around 1.4X BV. Sun Life’s core growth is over 10%, largely due to their expanding footprint in US group insurance. They have a wonderful asset in the US, MFS, which is a great financial company. Yielding around 3.8%.