The big Canadian bank stocks look quite intriguing as we wander into 2024, even with the slate of headwinds that could weigh heavily on loan growth. Indeed, a recession and pressure on mortgages could have the potential to act as a major drag on shares. That said, the bank stocks have had curbed expectations for some time. And their valuations reflect such, in my humble opinion.
Even if the banks gravitate downward over the coming quarters, I don’t think Canadians should shy away from the entire financial sector. The financial scene represents such a massive part of Canada’s economy. Further, dividend yields seem to be on the high end, while valuations seem a tad skewed towards the lower end. So, if you’re a value investor, it’s time to give the financials another look.
At this juncture, insurance stands out as a great value option for investors looking to invest beyond the big banks. Let’s look at three of my favourite ways to play Canada’s insurance scene.
Manulife Financial
Manulife Financial (TSX: MFC) stands out as one of the most exciting life insurance plays on the TSX Index, while shares trade at less than $30 per share. The dividend sits at just under the 5% mark after many years of choppy (but mostly sideways) trading action. After the recent upside surge, I do see the potential for MFC to add to its recent breakout past its long-term ceiling of resistance of around $27 to $28.
Undoubtedly, growth out of Asia could help Manulife outgrow its peers over the long haul. And though the Asian region has more than its fair share of headwinds, I’d argue the risks are worth the shot at a richer reward. MFC stock’s breakout moment has been years in the making, so if you’ve got the name on your watchlist, it may be time to start doing some nibbling, especially as the world economy has a chance to really heal.
Intact Financial
Intact Financial (TSX: IFC) is a well-run property and casualty (P&C) insurer that’s been rocketing higher over the past several years. It’s been a much better investment in Canada’s insurance scene than the life insurers over the past 10 years, which saw IFC stock more than triple (209% gains).
With a nice 2.1% dividend yield and good amount of longer-term momentum, I view IFC stock as an intriguing long-term option for investors seeking a greater degree of consistency relative to the life insurers. After a flat 2023, IFC stock looks more than ready to move on to higher highs. Though you’ll probably get a lower multiple for a life insurer, I continue to view IFC as a good mix of growth and value.
IA Financial
Finally, we have IA Financial (TSX: IAG), which is incredibly cheap, with a dividend yield sitting at 3.36%. While it’s not the richest yield of the batch, I am a fan of the 7.9 times trailing price-to-earnings multiple and the company’s history of swiftly recovering from the nastiest of economic downturns.
Now, the next recession is likely to be quite mild. However, it never hurts to be prepared for the black swans that may be lying outside of your radar. Remember, it’s the punches you don’t see that can really hurt the most! In that regard, IAG stock stands out as a great insurer that was built to cope with rough times. Of the three insurance stocks in this piece, IAG stands out as one of my favourites.
