Friday, March 30, 2012

Manulife Financial Corp 2

I own this stock (TSX-MFC). I invested in this company first in 2005 and then again in 2006, 2009 and 2010. I have lost at the rate of 11% per year. My dividends income was at the rate of 3% per year. Without dividends, my loss would be at 14% per year. My stock has a capital loss of 54% excluding dividends at the end of last month. The latest price shows that my capital loss is 42%.

When I look at insider trading, I find none at all. No insider buying and no insider selling. In fact it looks like insiders are retaining their options. This is a hopeful sign. What, of course, I do not like is that everyone, including directors, has more “options” than shares. Options for this company include not only things actually called options, but Rights Performance Share Units (Psu), Rights Restricted Share Units (Rsu), and Deferred Share Units.

The problem with insider trading reports is that they only consider “options” that are called “options”. However, I look at all free stock that is given to insiders as options. As far as I am concerned, such things as Deferred Share Units are options. Some people call these other “options”, restricted stock awards. See article on this subject from 2003 in Benefits and Pension Monitor magazine.

There are 497 institutions that hold 61% of the shares of this company. They have bought and sold stock over the past 3 months with a net of buyers, but they have reduced their overall exposure to this stock by 2%.

I have 5 year median low and high Price/Earnings Ratios of 13.65 and 33.71. However, P/E’s have been quite high over the past couple of years. I have 10 year median low and high P/E Ratios of 12.49 and 16.31. The 5 year median high is probably not representative of this stock. However, the current P/E Ratio is just 10.67 and this is low and shows a low current stock price.

I get a current Graham Price of $19.05. The low difference between the Graham Price and stock price is the stock price 3.3% lower than the Graham Price. The median difference between the Graham price and stock price is the stock price being 13% higher than the Graham Price. With the current stock price being some 28% lower than the Graham price, it would suggest that the current stock price is low.

I get a 10 year median Price/Book Value Ratio of 1.79. The current P/B Ratio of 1.08 is some 60% of the 10 year median ratio. This relatively low P/B Ratio points to a low current stock price.

Even though the dividend was decreased in 2009 and it has not changed since, the current dividend yield of 3.8% is some 12% higher than the 5 year median dividend yield of 3.4%. This also points to a low current stock price.

When I look at analysts’ recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus would be a Buy. A Buy recommendation gives a 12 months stock price of $16. The latest financials presented no surprises and analysts seem to expect insurance company’s environments to improve over the next couple of years.

Analysts feel that the current dividend is safe. No one thinks that this is anything else than a long term buy. Some analysts are still worried about low interest rates. A couple of analysts like Great West Life (TSX-GWO) better.

I am going to hold on to my shares. I think they will recover nicely, but I still have a while to wait. To buy at this point is risky. However, the share price is very good for anyone that can afford the risk. The dividend is nice at 3.8%.

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.

1 comment:

  1. Susan,

    I usually read the MoneySense at the library but I bought the April issue. Good comment and good picture. Thank you.