Sun Life Financial Inc (SLF.TO)

Has had a huge run, of about 47% since July. There is some anticipation that interest rate will move higher, which will be helpful to it. Have been good at executing. Dividend should be safe.

All lifecos were trading lower than BV, which is a pretty good sign for a value investor. Ranks very high in his Mark model. Have to start growing their BV now. Really tapered off their exposure to equities. Equities have done extremely well in the last 6 months but they’re not going to get the same bang for their buck as they once did. We now need interest rates to rise. Would prefer it at around $27.

Chart is definitely scary and looking like it is getting ahead of itself but had a big beat last quarter on lower capital review charges. Core results have been great for a long time. Just sold their US annuity business, which de-risks the balance sheet. Deployed some assets in Malaysia, which is a very high growth market for them, a signal to investors that they are ready to grow by acquisition again. Trading at around 1.3X Book, pricier than Manulife (MLF-T) so there is probably better value in Manulife but people are going into this one because of the higher dividend. (See Top Picks.)

Kind of likes the lifecos and thinks they are all going to go higher. Nice thing for the forecasted earnings this year is that the dividend is safely covered. Could see it moving 15%-30% higher. (See Top Picks.)

Financials. Is there a seasonality for financials such as lifecos and banks? Yes. It usually kicks in at about the end of January and runs right through until the end of April. Normally this provides a 6% return plus a dividend yield of 5.2%.

Sell Bank of Nova Scotia (BNS-T) and buy Sun Life (SLF-T)? All of the banks came out with half decent quarters but nothing spectacular. Sun Life pays a good dividend and is in a much better position and has probably more upside.

This is a bet that we may have seen the low in long-term interest rates last summer. This is showing in the way some of the life insurance companies have been behaving. Feels that this has some of the better fundamentals within the Canadian lifecos.

One of the issues with the insurance companies is that they are trading at very low multiples and pay great dividend, which they can continue to do but interest rates really affect these companies. He believes that interest rates will stay low. If you have a 3-5 year time horizon, it would make sense to own this.

Over the last couple of years the lifecos, particularly this one and Manulife (MFC-T) have done more to de-risk their balance sheets and change their product mix. Feels these companies are in relatively good shape, provided we are in a recovery. If we head back into a deep recession, there could be some downside. (See Top Picks.)

Just sold their US variable business at a loss, which is what got some of the lifecos into trouble. This reduced their assets and will reduce their earnings in the short-term but it reduces the volatility tremendously. Now going back to being an insurance company and a money manager. Good yield.

5.3% yield. Has been on his radar screen. Yield is relatively safe. There is always risk with lifecos which is why he has not pulled the trigger. More stable markets next year will help it next year. They are down because of an issue that raised additional cash.

When they reduce their exposure to the risks, interest rates and the risk in stock prices, then the life companies can do very well. Today’s action by them was a major move to reduce risks in the US, by selling the annuity business. This will cost them $.22 next year in earnings and takes about $1 billion off of BV. Some people were disappointed but he took the opposite view.

Has been hitting 52-week highs lately. Low interest rates have been a problem for lifecos. Had thought 6 months ago that interest rate were likely to pop up but he is now forecasting that slow growth will be staying with us along with low interest rates. Well-run company. Feels the dividend is safe.

If you draw a trend line on the moving average, the stock has managed to go above it. It has reversed its original downtrend. It is now in a better trend. Probably a good place to step in. Probably won’t run into too much problem until about $30.

Has his eye on this one and when he sees rates starting to rise and markets going up further he would have a good hard look at it, but not here.