Many beginner investors are all about chasing the highest return in the shortest amount of time possible. It’s the sexiest part of investing, and while today’s investors have a strong desire to get rich quickly, it’s this chasing of short-term riches that leads many beginners to their demise.
Back in 2017, when the stock market was a smooth upward ride, many beginner investors likely dipped their toes into the investment waters for the first time. Unfortunately, it’s these investors who likely took a majority of the damage as Mr. Market gut-punched investors just a few weeks after the term “market melt-up” was being thrown around by the talking heads on TV.
Further, it’s likely that these new investors were quick to sell at a loss as the declines gradually exceeded their personal loss thresholds and pain tolerances. Although the October-December plunge was unforgiving to beginners, it should have registered a very important lesson for those who bought on greed and sold on fear, which is the opposite of what Warren Buffett, the greatest investor and teacher of our time, does to further build upon the tremendous wealth that he’s amassed through the decades.
Now that fear is the dominant emotion instilled within most investors; it’s time to do some shopping with that extra $6,000 TFSA contribution for the year. If you’re thinking about playing defence with dividend stocks and are willing to go against the grain, Manulife Financial (TSX: MFC)(NYSE: MFC) is a custom-tailored name that you should get greedy with!
What a complete dog Manulife stock has been in 2018. At the time of writing, the stock is off 31% from its high reached last January. That’s a steep drop, no doubt about it, especially for a well-known blue-chip that’s a core holding in many Canadian mutual funds.
Looking at the longer-term chart, you’ll see a textbook head-and-shoulders-top formation that I warned investors about earlier in the year when the stock was nearing the completion of its right shoulder. Now, I know technical analysis isn’t without its faults. But if used in conjunction with technical analysis, I believe entries can be better timed for those who’ve already done the homework and have the stock on their radar.
Manulife stock now sports a fat 5.2% dividend yield, the highest it’s been in recent memory after the negative momentum was exacerbated by a short-seller from a firm called Muddy Waters who claimed Manulife was putting its investors at risk with a lawsuit that Manulife executives were quick to downplay.
Investors are still a bit on edge about the whole situation and the recent pullback in the broader markets, but for those willing to go against the grain, Manulife stock is the cheapest it’s been since the fallout that followed the Great Recession.
Foolish takeaway on Manulife stock
At 0.9 times book, and 0.8 times sales, I find it unlikely that Manulife will become much cheaper from here, unless a recession hits.
I exited my entire position in Manulife on the summer bounce in the mid-$20 levels last year, and after the recent carnage, I’m compelled to get back in at a now much cheaper price.
Stay hungry. Stay Foolish.
