Friday, May 27, 2011

Manulife Financial Corp 2

I first bought this stock (TSX-MFC) in 2005 and more in 2006 and 2009. My latest purchase was in October 2010. I have an average amount of this stock relative to other stocks in my portfolio. To date, my total return is a negative 7% per year. I, however, do expect that this stock will improve in due course. The portion of this total return due to dividends would be 3%.

I know that I reviewed this stock briefly in October 2010 because I was considering buying more at that time. I am reviewing it today, as it is one of the stocks I own and I have updated my spreadsheet for the financial year end of December 2010 for this stock. I have also updated my spreadsheet for the first quarter of 2011.

The first thing to look at is Insider Trading. Over the past year, there has not been much of either, but more insider buying and insider selling. The net buying is $.4M. All is being done my directors. When I look at this stock last year, there was also very minimal insider buying and insider selling.

However, as with most large companies, the insiders, except for directors, have lots more stock options than shares. The current CEO has over 3.28M stock options worth around $55.4M.

When I look at 5 year median Price/Earnings Ratios, I get a low P/E of 13.65 and a high P/E of 15.90. By this measure, the current P/E on this stock at 10.71 is relatively low. I get a Graham Price of $21.36 and the current stock price at $16.92 is some 20% lower. The 10 year median low difference between the Graham Price and Stock price is 3.3%. So a difference of $20 shows a relatively low current stock price.

I get a 10 year median Price/Book Value Ratio of 1.94 and a current P/B Ratio of 1.32. That means that the current P/B Ratio is some 68% lower than the 10 year median ratio and again points to a relatively low current stock price. The current dividend yield is 3.1% and the 5 year median yield is 3.2%. A good stock price is when the current yield is greater than the 5 year median yield. This is the only indicator to show a current stock price that is not low. They have just half their stock dividend.

First of all, on analysts’ recommendations for this stock, they are all over the place. I find recommendations of Strong Buy, Buy, Hold, Underperform and Sell. However, the majority of the recommendations are with Buy or Hold. The consensus recommendation is probably a Buy. (See my site for information on analyst ratings.)

All the analysts think that this company will recover. They have a tendency to talk about how long it will take. Some say it will continue to do badly for the next 3 or 4 months and some say it may take as long as 3 to 5 years to recover. Some think that the market is currently being far too negative about this stock.

Analysts’ recommendations sometimes have a lot to do with the particular analysts’ time horizon. Some will only recommend stocks that will do well over the next while. Other analysts have a much longer view when investing. I tend towards to long view, so I will continue to hold my shares in this company. I will not be buying more as I have enough invested in this stock. If you remember my review in October 2010, I was wondering if I should buy more at that time. I did.

See blog of Stock Trade Review which gives this stock a Hold recommendation. The article gives the reasons for this rating. Another blogger Dave’s stock picks talks about why he thinks this stock is a buy. Another blog talks about the effects that the new accounting rules of IFRS will have on insurance companies.

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 here Manulife. See my spreadsheet at mfc.htm.

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 for stocks followed and investment notes. Follow me on twitter.

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