The markets are up as an end to the pandemic heaves into sight. All eyes are on Pfizer (NYSE:PFE) and its breakthrough vaccine candidate. But sooner or later, the market will find ways to pick holes in its own bullishness. Before long, investors are bound to pull apart this particular vaccine thesis. The downside could be sudden, and a selloff widespread.
Don’t trust the rallying stock market just yet
Monday’s vaccine rally didn’t convince me. As I wrote at the time: “The markets are moving fast, following a trend that was set early on in the year… Some of those movers could have changed direction by the end of the week, though. As trigger-happy investors wash out of the market, contrarians should buy quality and stick to their strategies.”
This market is highly volatile. A combination of hope and doubt are adding to the crazily oscillating momentum. Fatigue is setting in, both from the pandemic, and from the consistent stress of the U.S. election. Investors are on a hair-trigger. Worse still, the market is strongly event-driven, with single stocks able to rock entire markets. This week’s main actor was Pfizer. Only recently just two stocks, Apple and Tesla, managed to cause a high-charged selloff between them.
But selloffs contain opportunities. This week’s bargain quality stock pick is Manulife Financial (TSX:MFC)(NYSE:MFC). The big-name insurer has had a rough year of it, and that’s putting it mildly. The insurance industry has been thoroughly beaten up by the pandemic. From force majeure claims to low interest rates, insurance is a tough gig in 2020 by any standards.
A long-range stock pick for recovery upside
This name has already proven its potential as a centrally important comeback stock, though. Packed with upside at the front end of the week, Manulife’s sails were filled with the much-trumpeted Pfizer breakthrough. Of course, there is much farther to go before the pandemic – and its economic impacts – are under control.
But there are early signs that Manulife could come back stronger as the current public heath crisis begins to ease off. The insurance industry will no doubt have a tough time clearing the backlog of pandemic claims left behind by this car wreck of a year. However, the industry – and this star stock – will likely begin to recover once the public health crisis has abated.
As Manulife reports its quarterly earnings after hours, it’s important to bear in mind that this wide-moat business holds long-term potential for income investors. However, an EPS estimate of just $0.53 shouldn’t be too hard to beat. That’s down by around 30% in the last 12 months, so investors aren’t expecting big things of this stock in the current quarter.
In normal years, Manulife stock would add classic defensive properties to a portfolio. As a non-banking financial asset type, Manulife also provides diversification in a space dominated by Bay Street lenders. But by using the “build and trim” method in a market crash scenario, investors can still glean these rewards while lowering capital risk. In addition, income investors have a rich a 5.3% dividend yield to mull over.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. David Gardner owns shares of Apple and Tesla. Tom Gardner owns shares of Tesla. The Motley Fool owns shares of and recommends Apple and Tesla.