Reason price is dropping?Manulife is a very good company, many divisions are growing and performing well. They have a strong growing presence in Asia. They are increasing hedging their exposure to markets to reduce their risk. Overall, I'm long and think that they will be significantly higher in 5 years, as will the dividend.
A couple of points I would make are:
1. It would be difficult or impossible for any one to manipulate the price of this stock when there are almost 2 billion shares outstanding
2. Although they have increased their hedging from 39% to 51%, they are still very vulnerable to dropping value of the market in general. The table below is from the last Q1 quarterly report. It shows how sensitive income is to declines in the general market. My impression is that a 10% drop in the market will cost Manulife 1.1 billion in income.
iv) Impact on net income attributed to shareholders arising from both variable product and from
the general fund market price risk for public equities
The following table adds the sensitivities to a change in market value of public traded equities on policy
liabilities for other than variable products, to the sensitivities in table iii) above (“Impact on net income
attributed to shareholders arising from variable products public equity market price risk”).
Change in market value of equity funds (1) (Canadian $ millions)
As at March 31, 2010 As at December31, 2009
10% decline $(1,100) $(1,200)
20% decline (2,400) (2,800)
30% decline (3,900) (4,600)
10% increase 900 1,000