Metlife (MET)

(A Top Pick July 11, 2017. Down 7%). This has gone down even as interest rates have come up. He is holding with it, with a very small position. Life insurers are not participating in the financials rally as much as he expected. His model price shows a 47% upside, but the market appears to dislike some aspect of MetLife’s balance sheet and he is not sure what that is. Because he is not sure what is wrong, he would not buy it.

One of the biggest life insurance companies. Spawned off the individual insurance part in a company called Brighthouse earlier this year. MetLife has been hurt lately by some controversy. In the long run still likes the outlook for both Brighthouse and Metlife, and rising interests rate do help insurance companies a lot.

(A Top Pick July 11/17 Down 2%) All the insurers are being helped by rising interest rates, yet the stock price has not increased. He is disappointed by the performance, but will continue to stick with it. He has a model price about 30% higher. Yield 3.5%.

(A Top Pick May 1/17, Up 5%) It spun out Bright House. He continues to own both. They had to take a hit on benefits that people were not getting and should have.

This is a diversified insurance company with a bias to life. It is in a good capital situation. The technical chart is too boom and bust, which he can’t explain. Insurance broadly has generally under-performed and he thinks you are taking more risk than the reward you are getting. He would prefer straight financial stocks instead.

A sleepy little story. It is really cheap. He likes it for strong buybacks, dividend growth and upping their return on equity. 11% forecast earnings growth. (Analysts’ target: $55.00).

(A Top Pick Jan 13/17. Up 15%.) Still likes this. It’s trading at about 1X Price to Book, which is cheap in the financial world. Pays about a 3% dividend, which is expected to grow 6%-7% over the next several years. Right now, the 10-year treasury is above 260 and rising interest rates will help companies like this. They have very strong international operations. 3% dividend yield.

(A Top Pick May 8/17. Up 15%.) Changes to the US are positive in one sense, but there are problems in the insurance industry in another. Interest rates are going up, which should help. He would probably hang in, with the admonition that if something better came along, he might jump.

Versus American banks?He likes US banks versus insurance companies. Banks are in a much better position to deliver earnings growth, versus some of the insurers. Insurers, both in Canada and US, do a little better when interest rates go up. Their liabilities go down and they also get a better return on assets. There is better risk/reward on the banks.

He likes the insurance companies in the US. This recently did a spinoff of their smaller financial division. It has recently spiked over the last couple of months. Trading at 11X earnings with a decent growth rate. Insurance companies, particularly in the US, are going to move along with what is going to happen with interest rates. He likes insurance companies, but wouldn’t ignore large US banks. Dividend yield of 3%.

(A Top Pick Nov 8/16. Up 12%.) One of the biggest financial companies in the US. In late July, they spun out their consumer division, which he took advantage of. He still likes the outlook for this company.

Not expensive, trading at about 10X earnings and has a very good dividend yield of about 3.4%. They sold Bright House, and can now concentrate on their core business. They need to bring costs down by about $1 billion, and he thinks there will be better capital allocation between dividends and buybacks. All in all, you should see the stock price go up.

MetLife, Prudential or the American banks? He would give a bit of a nod towards the banks. As a general proposition, there are more ways the banks can boost earnings. The purchase of insurance is very much out of favour. Regarding MetLife versus Prudential, he would give a slight nod to Prudential as they have been doing some cost cutting which will help their bottom line.