Sunday, April 2, 2017

I was reading "The Little Book of Value Investing" by Christopher H. Browne,(Tweedy Browne & Co LLC.), and he likes Value stocks with a Price to Free Cash Flow below 10. I came up with Manulife Financial Corporation, (MFC), with a P/FCF of 3.01.

Dow Jones Industrial Average 20,663.22  (Down) Week Ending 03-30-2017
S &P 500 average 2362.72 (Down)

The past few weeks in the stock markets here in the US have been like a poker game where everybody keeps getting bad cards and throwing them in, (with nobody winning). Well at least as far as Value investors. The market keeps running up a select group of growth stocks to unsustainable highs. This is a time that test Value investors meddle. It is a time to be patient and keep 20% in cash until the time is right to buy and there is an adequate Margin of Safety.

I continue to read the books of classic Value investors, such as the managing directors of Tweedy Browne, to refine my discipline in this area. One area Christopher Browne brought up in his book, (among many other good Value investing ideas), is to look at Price to Free Cash Flow and stocks that are listed with a P/FCF of less than 10. This led me to the following stock.

ManuLife Financial Corporation, (Symbol MFC $17.74, US Dollars, NYSE)   Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Manulife Financial more recognized operations in the USA are John Hancock Life Insurance and John Hancock Wealth Management. While these are important, 

The real key to ManuLife Financial going forward though is the offering of Insurance and Wealth Management to the very burgeoning markets of Asia. This according to their brand new President, Roy Gori. 

 So the first important number I am going to look at and the theme of this post is the Price to Free Cash Flow which is currently 3.01. Very good being under 10. The company also trades at a current price to book value of 1.21. The PEG Ratio is 1.47 and and ROE of 7.3%.

ManuLife Financial also pays a handsome dividend of 3.53%.
The company did $39.96 Billion dollars in sales ad quarter over quarter sales were up 413.4%. 2016 sales were up 59.2%.

Earnings per share for 2017 are projected are anywhere from $1.76 to $2.18 to $2.39 per share according to different sources with a forward PE below 10.

The IBD ranking on the stock is "94 "and "A". It is ranked #2 in its sector in IBD.  The analyst have 10 buy ratings and 3 outperform and 5 hold ratings on the stock.

So a new tool to add for our evaluation of Value stocks, Price to Free Cash Flow to go along with PE, PEG Ratio, Return on Equity, and Price to Book. (A little bit of Revenue growth doesn't hurt the cause either!).  I would rate ManuLife Financial, (MFC),  a buy here and a fine addition to your portfolio.

April has arrived and the flowers and the green leaves cannot be far behind. Hopefully this market will also come into bloom.

Spring greetings to you and all the best with your investments,


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