The markets are moving fast, with events south of the border unsettling investors. The end of the week saw vaccine hope leach from the TSX Composite Index, down 1.13%. Meanwhile, coronavirus cases are rising in Canada, further crimping investor sentiment. But stocks rallied again Friday morning, with the index back up 0.88%, as it rode a boost in the materials sector.
A highly volatile week for stocks
Midweek already seems like an aeon ago. As we revisit Manulife Financial (TSX: MFC)(NYSE: MFC), which just reported earnings, let’s recap the events of the last couple of days on the markets. Monday was a roller coaster of a day, with Pfizer trumpeting a vaccine candidate with 90% efficacy. Tech stocks dived, oil and gas jumped, and investors breathed a huge sigh of relief. But fresh lockdowns and vaccine doubt have erased that lead.
Taking an holistic view of the markets can help when singling out stocks to cherry-pick for a multi-year portfolio. From growth in Asia to the ongoing trend in digitalization, Manulife ticks more boxes than a newcomer might suspect. As an all-rounder well able to weather the pandemic, Manulife provides some wide-moat muscle to a portfolio.
Analysts were looking for EPS of $0.53 this quarter from the life insurance giant. That’s a year-on-year quarterly loss of 10%. Things weren’t quite that bad, with core EPS reported at $0.73. The stock was up slightly come Friday, despite an overall year-on-year loss. Again, losses in the insurance industry are no surprise this year. Growth in Asia also helped to round out a consensus moderate buy thesis.
A cheap stock with big ambitions
Eschewing managerial involvement and building a personal investment portfolio yourself needn’t be a stressful activity. Stepping outside of the comfort zone of ETFs and other managed baskets of stocks has its risks, to be sure. But the benefit of picking outperforming names for a TFSA, RRSP, or other investment vehicle can be rewarding in the long term.
For instance, Manulife has the dual benefit of being a consistent payer of a fairly rich dividend, while packing recovery upside potential. A desirable 5.4% dividend yield is covered by a low payout ratio of 41%. Investors looking for nicely valued dividend-growth stocks should add this name to a wish list.
How much upside could this name have? Let’s look at the price targets. Consensus estimates see Manulife priced as low as $21 and as high as around $42. A moderately optimistic projection sees the insurance blue-chip stock selling for $27. At the moment, Manulife has a price tag of around $20. That technically gives Manulife only negligible downside potential according to analyst consensus.
On the flipside, enticing capital gains between 65% and 100% could be on offer, depending on how bullish one is on a post-pandemic recovery. While a vaccine breakthrough is baked-in to some extent, the uncertainty still facing the markets is calculably high. This week saw Manulife gain 10% on average amid the market’s vaccine bullishness. In short, anyone buying value stocks should make note of this name.
