Thursday, May 23, 2013

Manulife Financial Corp 2

On my other blog I am today writing about Selling? Attitude maybe everything...continue...

I own this stock of Manulife Financial Corp (TSX-MFC, NYSE-NFC). I first bought this stock in 2005, then more in 2006, 2009, 2010 and a bit more in 2013. My total return is a negative 5.97%, with a capital loss of 8.83% and dividends of 2.86%.

When I look at insider trading, I find a bit of insider buying and a bit of insider selling. There is a net of insider buying at $0.4M. This is so little that it tells no really nothing. Not only do insiders have options, but they have Rights Restricted Share Units, Rights Restricted Share Units and Deferred Share Units. There are a lot of officers with various types of options outstanding.

The CEO has shares worth $1.8M and has options are worth $82M. The CFO has no shares and has options worth $9.3M. An officer has some shares and has options worth $4.2M. A director has shares worth $0.4M and has options worth $0.7M. This is just to give you an idea on insider share ownership and option values.

The 5 year low, median and high median Price/Earnings per Share Ratios are 11.79, 22.75 and 33.71. This is wider than normal spread for this ratio. The current P/E Ratio is 12.37. This shows that the stock price is reasonable. My current P/E Ratio is based on a stock price of $15.96 and EPS estimate for 2013 of $1.29.

I get a Graham Price of $19.03 and the 10 year low, median and high median Price/Graham Price Ratios are 0.97, 1.13 and 1.33. The current P/GP Ratio is just 0.84. This test says that the current stock price is cheap.

I get a 10 year median Price/Book Value per Share Ratio of 1.71. The current P/B Ratio is 1.28. This current ratio is only 75% of the 10 year median P/B Ratio. When this current P/B Ratio is less than 80% of the 10 year median P/B Ratio, this tests says that the stock price is cheap.

I get a current dividend yield of 3.26%. The 5 year median dividend yield is 4% higher at 3.39%. What you want is a current dividend yield greater than the 5 year median dividend yield. However, the two yields are quite close so that this test says that the stock price is reasonable. (Part of the reason for the low dividend yield is the dividend decrease that occurred in 2009.)

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations, with the most recommendations being in the Buy category and the consensus recommendations would be a Buy. The 12 month consensus stock price is $17.60. This implies a total return of 7.89%, with 3.26% from dividends and 4.64% from capital gains. (This is certainly not a great return, but it is acceptable.)

There are still analysts that think that this stock is a good long term buy. Interest rates cannot stay low forever. (However, things like low interest rates can last a lot longer than anyone images.) Other analysts talk about this stock doing ok considering the problem that insurance companies have with low interest rates. People still feel that this company is a good solid blue chip company and this is my feeling. Low interest rates will eventual end, we just do not know when at present.

The Wall Street Cheat Sheet website talks about the high pay of the CEO of Manulife for 2012. The Insider Monkey website remarks on the fact that some hedge funds have sold their shares in this company. The MEPB Financial website talks about this stock being in the top 10 investments of a number of mutual funds listed as the top 10 Mutual Funds for 2013.

I will be retaining the shares I have. My stock tests show that the stock price on this stock is from cheap to reasonable. It is in this price range for a reason. It probably will not do much besides pay a dividend until interest rates start to rise. So it will be a while before there will be much in the way of capital gains. See my spreadsheet at mfc.htm. This is the second of a two part entry. The first part is here.

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. Its web site is here Manulife.

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 or StockTwits.

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