Friday, April 17, 2009

Manulife Financial 2

I am continuing my review of this stock (TSX-MFC) today. The first thing I looked at was Insider Selling and Buying. There is lot of insider selling and this occurred at the end of 2008, before this stock dropped heavily and it was mostly done by the CEO. This is probably because Dominic D'Alessandro is stepping down as CEO of this company. I do not think this gives us useful information.

Is this stock at a good price when looking at the spreadsheet ratios? First, I will look at the dividend yield. This yield is currently over 5% and the 5 year average is just over 2%. Looking at Mike Higgs’ report at , he shows that this stock is cheap when compared to the historical average yield and the historical high yield.

When looking at the P/E ratio, the current one is around 10 and the 5 year average is over 15. So this shows that the price of this stock is relatively low. The other thing to look at is the Graham Price. The Graham Price was low in 2008 because of the fall in earnings. However, if earnings this year are at least $1.00, then the current price is at the Graham Price. If the estimate of $1.90 is close, then the current price is some 28% lower than the Graham Price.

First, I note that the Globe Investor site gives this stock a 3 star rating (out of possible 5 stars). Next, the recommendations on this stock go from Strong Buy to Hold. There are lots of Strong Buys and lots of Holds and a small number of Buys. The consensus rating is Buy. (See my site for information on analyst ratings.)

When looking at the charts, this stock has done worse than both the TSX and the Financial Sub-Index for the periods of YTD, 3 years and 5 years. It is not until you look at the last 10 years that this stock has done as well as the Financial Sub-Index and better than the TSX. This stock has been particularly hard hit by this latest bear market. This stock fell really hard in September 2008.

Part of the problem with this is company is the guarantees they offered for their variable annuities and segregated funds. This gives them a big exposure to the stock market. They did not fully hedge these guarantees, and hedging such guarantees is usually what is done. As I understand it, these guarantees are against the stock market being lower at the end of any 10 year period. However, the chance of this happening is very small. I have discussed this before and you can see my comments at Stock Market Returns Long Term.

This is a life insurance company in the financial services business. It offers financial protection products (e.g. Life Insurance) and wealth management services (i.e. segregated funds, mutual funds and pension products). They sell products to individuals and business. They are an international company, selling in Canada, US and Asia. This company is listed on Canadian, US, Hong Kong and Philippines Stock Exchanges. Its web site is See my spreadsheet on this company at

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at for a list of the stocks for which I have put up spreadsheets.

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