It is an important exercise to periodically review the performance of our stock holdings as well as those stocks that are on our watch lists. This review should happen at least once a year but also when big stock price movements are noticed.
No analysis of stock price performance in February would be complete without addressing the elephant in the room; the spread of the coronavirus, which has caused stock markets to get pummeled. But while investors were in fact triggered by coronavirus fears, these fears compounded on fears that were already present in an increasingly nervous investor population, as one of the most spectacular bull markets in history continued its rise.
Sun Life’s stock price falls in sympathy with the market
In February, we had the fear, stress, and negative sentiment of the markets related to coronavirus fears, which was the biggest factor that sent Sun Life Financial’s (TSX: SLF)(NYSE: SLF) stock price down. Also, after a spectacular run in 2019, with the stock up 17%, fears that the stock was overly valued with limited upside motivated downgrades from the analyst community.
Sun Life management cautions on Asia
In the fourth quarter, earnings from Asia were weaker than expected, and management cautioned that the company is facing headwinds related to the coronavirus in the form of slower sales and higher claims. Further to this, management is watching the situation in China closely and is very cognizant of the fact that the degree of the economic slowdown in China and globally remains a big uncertainty.
Outflows at MFS persist
Net outflow at Sun Life’s MFS division have persisted, as we saw in the company’s recent fourth-quarter results. To combat this, Sun Life has made numerous sizable wealth management acquisitions over the last several years, the latest being the $16 billion acquisition of global infrastructure and real estate manager InfraRed Capital Partners.
Today, with more than $1.1 billion of assets under management, Sun Life’s growing wealth business serves to underpin strong growth and diversification. As one of Canada’s Big Three life insurance companies that also has a significant wealth management presence, Sun Life is a leader that keeps growing, providing shareholders with strong long-term gains.
Foolish bottom line
Longer term, Sun Life continues to have a nice runway for growth in Asia, with expectations of 14-15% earnings growth in 2020 and 2021, as well as in its wealth management business. Recent stock price weakness can be expected to make a solid business even more attractive from an investment point of view. Over and above, the stock’s potential for continued capital appreciation, we have Sun Life’s 3.76% dividend yield to provide us with dividend income.
In closing, I would like to remind Foolish investors of our belief in holding great businesses for the long term. While this belief remains intact, we are also aware that sometimes, short-term stock price movements create opportunities to create wealth. By blending this long-term focus with a keen eye for short-term stock mispricings, we can use both strategies in harmony, and our quest for financial freedom can be fulfilled.
