# MFC - Buy? Sell?



## davext (Apr 11, 2010)

Manulife has been going up steadily since November. Is anyone optimistic about this?

I own quite a few shares of this and have taken some losses as well. I was thinking of buying more on a correction. I don't anticipate that they would increase their dividend any time soon but their stock will go up if the overall market does well too.


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## CanadianCapitalist (Mar 31, 2009)

davext said:


> Manulife has been going up steadily since November. Is anyone optimistic about this?
> 
> I own quite a few shares of this and have taken some losses as well. I was thinking of buying more on a correction. I don't anticipate that they would increase their dividend any time soon but their stock will go up if the overall market does well too.


I don't know about MFC in particular but I wonder if insurance companies are a better bet than banks here. Insurance has been hit hard by low interest rates but I'm thinking insurance will bounce back sharply if there is a global economic recovery.


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## andrewf (Mar 1, 2010)

I have some too. I'm down about 10% on my ACB. I should stay away from playing individual stocks .


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## Four Pillars (Apr 5, 2009)

It seems that MFC does very poorly or very well depending on the equity markets.

I might be simplifying, but I think buying MFC is like a leveraged position on the market as a whole.


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## HaroldCrump (Jun 10, 2009)

IMHO, MFC bottomed out at $11.xx back in Aug.
I expect it to range trade for a while, but on the whole, gradually start climbing back up the hill.
It would be quite some time before they are back in $30s range.
If your ACB > $25, you may want to average down now.
But if ACB <= 25, I wouldn't buy any more.
If ACB > $30, you have 3 more weeks to take a tax loss 

Disclosure: I do not have any position in MFC, so the above is pure, unbiased advice


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## andrewf (Mar 1, 2010)

I'm just going to throw this out there: why does it matter what you did in the past? Either MFC is a good investment or it isn't. I don't understand how in otherwise identical portfolios, different ACBs can significantly influence your decision to invest.

I guess I don't understand 'averaging down'.

If we're looking at this from a tax perspective, wouldn't it make more sense to harvest the loss before buying more?


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> I'm just going to throw this out there: why does it matter what you did in the past? Either MFC is a good investment or it isn't.


The reason it matters (at least, to me) is because of the price.
There is no such thing as a great investment, regardless of cost.
Every stock becomes overpriced at a certain point and underpriced at a certain point.
That "point" obviously varies from investor to investor, which is why we have a market.

The first decision to make is whether you want to go long or go short on a stock, or completely pass.
If you decide to go long, the next decision is at what price.
That's what we are talking about here since the OP is already long on this stock.



> I don't understand how in otherwise identical portfolios, different ACBs can significantly influence your decision to invest.


Because your ACB determines whether you are making money or losing money.



> I guess I don't understand 'averaging down'.


Averaging down enables you to make a profit sooner (and/or larger) once the stock price starts rising again.
If you are already long, and want to continue being long, it's a good opportunity to increase your profits.
Of course, if you no longer believe in the company and are convinced it's headed down the toilet, then buying more doesn't make sense.
Just get out.



> If we're looking at this from a tax perspective, wouldn't it make more sense to harvest the loss before buying more?


The only thing this would achieve is give you a writable loss that you can apply towards other profits that you may have made.
That's a separate issue.
Does not change anything regarding a particular stock if you first sell and then buy at the same price.


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## Square Root (Jan 30, 2010)

andrewf said:


> I'm just going to throw this out there: why does it matter what you did in the past? Either MFC is a good investment or it isn't. I don't understand how in otherwise identical portfolios, different ACBs can significantly influence your decision to invest.
> 
> I guess I don't understand 'averaging down'.
> 
> If we're looking at this from a tax perspective, wouldn't it make more sense to harvest the loss before buying more?


Agree with you. It only seems like a smart thing to do because your cost base is now lower. My cost base on this baby is $39 the worst performer in any of our portfolios. Not planning on selling at this point. A buy and hold dividend investor.


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## Larry6417 (Jan 27, 2010)

Square Root said:


> Agree with you. It only seems like a smart thing to do because your cost base is now lower. My cost base on this baby is $39 the worst performer in any of our portfolios. Not planning on selling at this point. A buy and hold dividend investor.


Square Root, I don't understand. You agree with Andrew (so do I), but you also say that you don't intend to sell. As Andrew stated, wouldn't it make sense to sell now to reap the tax loss and apply it to other gains? You can still re-purchase MFC after 30 days. You could hang on to MFC until (if?) it reaches your ACB of $39, in which case you avoid capital gains (if you sell at $39). However, you would lose because of the time value of money (tax savings now vs. tax savings years in the future, if ever).


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## Larry6417 (Jan 27, 2010)

I've made some money on MFC through writing cash-secured puts. The strike prices of those puts were $11 and $12. I was bullish enough to buy the stock itself too (just under $12). However, I sold covered calls (and allowed the puts to expire). I expect the stock will be called away from me in Jan 2011 at $14 + premium (~ $0.60 per share). 

I'm significantly less bullish on MFC now because it has run up so quickly. My understanding is that the new IFRS accounting rules scheduled to take effect in 2011 will negatively impact the insurers, esp. MFC. See http://docs.google.com/viewer?a=v&q...eo5UCX&sig=AHIEtbTMby9p3QeQm-oBhaVOOuLc-a4YdA


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## kcowan (Jul 1, 2010)

I don't have a horse on this race but I would stay away from MFC just because I cannot understand their books. If you want a good insurance company, why not stick with Sun or GWL?


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## Jungle (Feb 17, 2010)

I believe the CEO saying it's going to take until 2015 to get things back in order again. I own one share at $12 or so. Was going to start drip but no cash flow to invest in non reg right now.


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## el oro (Jun 16, 2009)

Chart shows a good probability that a long-term bottom was put in during the Aug to Oct low this year. Looks like a good hold. Next stop, 17.50.


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## andrewf (Mar 1, 2010)

HaroldCrump said:


> Because your ACB determines whether you are making money or losing money.


Seems to me the verb tense should be in the past. ACB determines whether you _lost_ or _made_ money. The milk is spilled.

To me, investing should be 'memoryless'. It shouldn't matter what the investor did in the past, or what they previously paid for investments, in deciding to hold things going forward. This is why I'm perplexed by varying recommendations on whether to buy/sell/hold based prices paid earlier. The only way this should influence decision-making is capital gains taxation.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> To me, investing should be 'memoryless'. It shouldn't matter what the investor did in the past, or what they previously paid for investments, in deciding to hold things going forward. This is why I'm perplexed by varying recommendations on whether to buy/sell/hold based prices paid earlier.


I guess where we are differing in opinion is whether the current price of a stock plays a role in your decision whether to buy or not.
I don't believe that an investment is a good investment at any price.
The same stock may be an attractive investment at a certain price point, and not so at another price point.
So if you still believe in the company then you have to decide whether to average down or not, when it drops below your average cost.
If you have lost faith, then just sell, nothing else matters.

One of the guys upthread had an average cost of $39.
If he still believes in the company and sees upside this is a good time to average down.
If not, then sell.

For someone that doesn't have an existing long position, the question is whether they see value in MFC @ $16 or not.
They may see value @ $12 but not at $16, so why buy.


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## andrewf (Mar 1, 2010)

I'm not saying current price doesn't matter, it's more that it's the only thing that matters. What you paid before is irrelevant.



> One of the guys upthread had an average cost of $39.
> If he still believes in the company and sees upside this is a good time to average down.
> If not, then sell.


Agree completely, except this is a non sequiter. His decision to buy more or sell his existing position (or hold) doesn't follow from his average purchase price.


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## humble_pie (Jun 7, 2009)

oh dear we're back to the yield-on-current-price vs yield-on-cost marathon. We all know andrew's view. He's at one extreme. In andrew's world, investors should pretty darn near come close to re-jigging their entire portfolios by noon every trading day.

at the other extreme are investors who pay attention to capital gain/loss consequences plus the management cost of every single investment decision.

if i have older bank shares yielding 20% or better on cost, all in tax-advantaged dividends and option sales, then re-jigging such a fine-boned leading lady dwindles in importance when compared to hundreds of other issues that require attention. I'm gonna let my leading lady continue to star. I might do a nip-and-tuck here & there to raise her cost base - sell a few shares on an upturn, buy a few replacement shares on a downturn - but as long as she remains a box-office magnet there's no way i'll dump her off the stage in favour of some bimbo with no background & no class.


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## andrewf (Mar 1, 2010)

> In andrew's world, investors should pretty darn near come close to re-jigging their entire portfolios by noon every trading day.


Strawman. I've never said this, nor do I believe it to be true. 

If you want caricatures, in your view, a winning lottery ticket is only worth the $5 you paid for it, and the same goes for a losing ticket. It's neither a fair nor accurate characterization, but hey, it's fun.


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## humble_pie (Jun 7, 2009)

in my view, a winning lottery ticket is worth the $5 million i won, but i have the awesome advantage of having paid only 5 bucks for it.


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## kcowan (Jul 1, 2010)

I think a discussion of lottery tickets belongs in this thread!


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## davext (Apr 11, 2010)

MFC is up another 5% today, doing way better than the rest of the competition.


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## Sherlock (Apr 18, 2010)

Have you looked at SUPR? I made a lot of money off it in the simulation I play and expect to make a lot more soon.


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## kcowan (Jul 1, 2010)

Also LLL which is up 69.33/56.12 since Wednesday = 23.5%


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## davext (Apr 11, 2010)

Sherlock said:


> Have you looked at SUPR? I made a lot of money off it in the simulation I play and expect to make a lot more soon.


too risky for my real money


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## Toronto.gal (Jan 8, 2010)

MFC's continued and successful expansion into China & other places, left me with little doubt that it was a good stock long term and hence I kept buying every time the stock went down and just let the dividends buy 'free' shares every quarter.

Let's hope their aim of increasing profit to $4-billion by 2015 will come true!


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## Eclectic12 (Oct 20, 2010)

Toronto.gal said:


> MFC's continued and successful expansion into China & other places, left me with little doubt that it was a good stock long term and hence I kept buying every time the stock went down and just let the dividends buy 'free' shares every quarter.
> 
> Let's hope their aim of increasing profit to $4-billion by 2015 will come true!


While I'm hoping for their aim as well - I'm confused by your "dividends buy 'free' shares every quarter".

If you are talking a Dividend Re-Investment Plan (DRIP), it's more of "dividends buy more shares commission-free, at a discount". 

I'm not aware of any 'free' shares.


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## Toronto.gal (Jan 8, 2010)

Yes Eclectic12, I was talking about my DRIP account & I consider free shares those that are bought with dividend payments because I did not pay for them! When shares were low, in the $11 or so range, the dividends were buying me twice as many shares as when the shares were higher, so beaten up stocks do offer a little consolation when dripping!


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## Eclectic12 (Oct 20, 2010)

Toronto.gal said:


> Yes Eclectic12, I was talking about my DRIP account & I consider free shares those that are bought with dividend payments because I did not pay for them! When shares were low, in the $11 or so range, the dividends were buying me twice as many shares as when the shares were higher, so beaten up stocks do offer a little consolation when dripping!


Hmmm ... well you did pay for the shares, so they weren't free. The truly "free" parts are the commission and potentially a discount over what the share traded for at the time of the purchase. 

The DRIP shares are certainly beneficial as you don't have to:
a) fund the share purchase (the dividends pay for the purchase)
b) pay commissions
c) plan when to buy in order to take advantage of the shares are down
(i.e. it's automatic).

I know this may seem picky but from the confusion I've seen around this forum and others, I'd prefer not to mislead anyone who is early in their learning process.

Cheers


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## davext (Apr 11, 2010)

Eclectic12 said:


> Hmmm ... well you did pay for the shares, so they weren't free. The truly "free" parts are the commission and potentially a discount over what the share traded for at the time of the purchase.
> 
> The DRIP shares are certainly beneficial as you don't have to:
> a) fund the share purchase (the dividends pay for the purchase)
> ...


Come on now, you're wasting everyone's time reading this crap. I started this thread and I knew exactly what TorontoGal was talking about. If some beginners wants to understand what it means, they can ask.


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## dagman1 (Mar 3, 2010)

andrewf said:


> I'm not saying current price doesn't matter, it's more that it's the only thing that matters. What you paid before is irrelevant.
> ...
> His decision to buy more or sell his existing position (or hold) doesn't follow from his average purchase price.


I don't understand how anyone can disagree with this. The only reason I can see for doing this is mitigating your risk.

If you are confident a stock is undervalued, I don't see why it matters what you paid for it a week ago, six months ago, or five years ago. It's either a good buy or it isn't. That you made a good buy or a bad buy in the past has no impact on whether it's a good buy today.

I'm all ears if someone can give me an explanation why this is wrong.

This forum is really getting whacky lately. A lot of speculators, a lot of technical analysis mumbo jumbo, etc.


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## Jungle (Feb 17, 2010)

Its the same concept as dollar cost averaging, but on the way down. If you are at shareholder at $40 share x 200 share = $8000. Then you buy at $12 share x 200=$2400

In the group of shares, average price is now $26 share. More chance of breaking even than waiting for $40 share to come back. In the long term, this is possible. Manulife just needs a 3-4 Qs of positive return. Share price should go up.


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## Sustainable PF (Nov 5, 2010)

current consensus?

buy? sell?


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## Potato (Apr 3, 2009)

dagman1 said:


> I don't understand how anyone can disagree with this. The only reason I can see for doing this is mitigating your risk.
> 
> If you are confident a stock is undervalued, I don't see why it matters what you paid for it a week ago, six months ago, or five years ago. It's either a good buy or it isn't. That you made a good buy or a bad buy in the past has no impact on whether it's a good buy today.
> 
> I'm all ears if someone can give me an explanation why this is wrong.



Well to start with, I don't think there's any good rule or guide on how much underwater you have to be to average down. It does depend a lot on the ever-changing situation, your transaction costs, etc... I also try to get away from anchoring on a certain price in the history, as you do need to evaluate things as they stand on any given day.

Anyway, that said, history does matter a bit, because there's a limit to how much of a stock you can buy. If you bought MFC at $16 and then it went down to $15.90 and thought it was still a good buy on that day, you'd buy more. Then the next day it's $15.75, and still a good buy on that day, so you buy more... it soon gets ridiculous. So you need some way to limit how much you'll continue to buy and average down. For example, if you wanted MFC to be 5% of your portfolio, and it only made sense to rebalance if it was off by more than 1%, then if you bought at $20 (assuming all else in the portfolio was equal), you wouldn't want to rebalance until it fell to $16...

The heuristics for when that averaging down makes sense are going to be different for everyone, and perhaps the price history is not the prime input, but there is a case for it to be a factor.

That was probably just a long-winded way of agreeing with "The only reason I can see for doing this is mitigating your risk."


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## kcowan (Jul 1, 2010)

MFC lowered from AA to AA-


S&P said:


> "We believe that the prospective earnings profile of Manulife Financial's U.S. operations will be weaker than we previously expected, given the current economic environment," S&P said in a statement.


The Street recommends to sell MFC


> Since January, MFC stock has dropped 19.7%, compared with respective gains of 7.5% and 7.3% for the S&P 500 and Dow Jones. Additionally, MFC has missed earnings estimates for the past two quarters and most recently reported a net profit margin of 19.9% in its last income statement.


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## Jungle (Feb 17, 2010)

Shares are over $19 now. :S


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