Thursday, June 25, 2009

Sun Life Financial 2

I am continuing my review this stock (TSX-SLF) because of the annual report and I have not yet reported on this stock, of which I hold some shares. I have no intentions of selling my shares at the present time, as I continue to believe in the long term prospects of this stock.

This company is going through a rough time. I noticed that analysts have lowered their earnings estimates for this stock since I updated my spreadsheet last in April 2009. In looking what analysts’ ratings are on this stock, I see Strong Buys, Buys and Holds. However, the overwhelming rating is a Hold. (See my site for information on analyst ratings.)

I looked at Insider Buying and Selling. I find there is more buying then selling. However, there is not enough of insider trading to affect what insider own in this stock. So in this case, insider trading does not tell us anything.

If you look at spreadsheet ratios, we find that the yield at 4.6% is higher than the 5 year average of 2.8%. The yield has often been lower than this and without 2008 yield of over 5%, the short term average is closer to 2.2%. The current P/E at 13 is not especially low, but this is based on low earnings for 2009. For higher earnings in 2010, the P/E falls to a much better 9.4.

Looking at the Graham Price, this price for 2009 at $40.14 and this is over 20% higher than the current price of $30.99. There is even a bigger spread (over 30%) between the one estimated for 2010 and the current price. If you look at the Price/Book Value, you will find that the current P/BV is quite a bit lower than that for the last 10 years. P/BV is currently at 1.02 and the average for the last 10 years is 1.56. The 5 year average is also 1.56. Of course, the other buy signal is the negative Accrual Ratio. The current one is over -5%.

When looking at the charts, this stock has done as well as the TSX Financials Index and much better than the TSX over the last 10 years. If you look at the last 3 to 5 years, it has underperformed both these indexes. For the past 6 months and past 1 year, this stock has done as well as the TSX, but it has underperformed the Financials Index.

I also want to once again point out about the worry over the guarantees for the segregated funds. This is basically a bet by the insurance companies that the stock market will not have 10 year periods of stock market loses. Segregated funds sold by insurance companies are the equivalent of mutual funds. However, they usually have some sort of guarantee attached. However, these guarantees are not cheap and usually increase the management fees by around 1% per year.

The TSX Index has been around in some form since 1956. I found only one year when there was a 10 year period of negative returns and this was the 10 year period ending in 1974. Although 2009 has also flirted with being 10 year negative return year, currently it is not. The 10 year return to June 23, 2009 stands at 17.6%. (See my site for information on my analysis of this question.)

This is an insurance company. It provides a diverse range of protection and wealth management products and services to individuals and corporate customers. It operates internationally. Its web site is See my spreadsheet 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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