The Canadian life insurance companies have really had a stellar start to the year. Undoubtedly, the Canadian economy may not be perfect, but the well-run insurers have found a way to march higher. As they hope to build on the momentum they built up in the first half, I do think that investors who are just a bit late to the financial trade may have a shot at scoring decent value alongside a good amount of newfound momentum in some of the well-run, timely insurance top dogs.
In this piece, we’ll have a closer look at a magnificent insurer that’s been a sleeping giant for many years prior to its latest, roaring bull run. As always, investors should conduct a thorough valuation and ensure they’re getting a good enough margin of safety before picking up a single share. In any case, I think the following name is a worthy buy on any near-term pullbacks. And with a fairly modest valuation, I wouldn’t be against starting a fairly hefty position right now as the TSX Index and S&P 500 gain speed going into the middle of summer.
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Manulife stock is quietly soaring
Indeed, Manulife Financial (TSX:MFC) has quietly gained more than 70% in two short years, thanks in part to exceptional results and an Asian growth engine that continues to hum. Indeed, the company is doing its best to make the most of a challenging macro situation. As the firm continues to fire on all cylinders, while the world economy hopefully bounces back from the first half’s tariff scare, I think shares of MFC have the means to climb much higher from current levels.
At the time of this writing, Manulife stock goes for 16.2 times trailing price-to-earnings (P/E) alongside a 4.1% dividend yield. The stock was much cheaper just a year ago, with a dividend yield closer to the 5% mark. But with momentum riding behind the life insurance business, I’d not look to throw in the towel quite yet, especially as the company continues to put its foot on the gas to take its Asia segment growth to the next level.
With higher interest rates and better profitability metrics, Manulife certainly deserves a more premium multiple as the firm continues putting together some phenomenal results. Of course, the main concern is what happens once central banks finally start aggressively hitting that rate-cut button. Tariffs, the potential for stagflation, and other headwinds may very well pave the way for a lower-rate environment.
The bottom line
Personally, I think rates are in a good spot, especially as inflation continues to linger like smoke. Sure, a few rate cuts would have been nice, given economic pressures and surging layoffs. But until inflation (particularly food inflation) is brought back under control, I wouldn’t look for much lower rates anytime soon. As such, Manulife’s robust results and higher profitability could last a lot longer. Add strength in the asset management business into the equation, and you’ve got the formula for a soaring stock that has what it takes to keep the good times rolling. MFC stock is a buy, in my books.
