Discovering undervalued shares could be like uncovering hidden gems within the inventory market. Occasionally, firms commerce beneath their intrinsic worth. Those that can choose these firms out of the myriad of choices out there to traders can get very rich. That’s the secret, no less than.

For a very long time, I’ve considered Manulife Monetary (TSX:MFC) as an undervalued insurance coverage and wealth administration big, and that’s been the case for numerous years. Nevertheless, with the inventory breaking out this previous yr (see chart beneath), maybe this firm isn’t as undervalued because it as soon as was. 

That stated, I nonetheless consider this should be a prime holding for traders seeking to generate a million-dollar portfolio for retirement. Right here’s why I feel MFC inventory is value a glance, even after its greater than 70% run-up over the previous yr.

Stable financials

Even after this explosive yr, Manulife inventory nonetheless trades at a a number of of round 15 occasions earnings, which is sort of cheap in comparison with many different firms on this trade and the market general. The truth that Manulife serves greater than 35 million clients globally (nearly the inhabitants of Canada itself) is indicative of the corporate’s international attain. Increasing into key markets within the U.S. and Asia, Manulife has grown its portfolio meaningfully, notably within the wealth administration house.

This has allowed for stable earnings per share development over this previous quarter. Manulife introduced in $0.66 in EPS for the second quarter (Q2), exceeding analyst estimates and inspiring some upgrades. The corporate’s strategic positioning throughout the monetary providers trade enhances its general product portfolio and makes the corporate a possible beneficiary of this ongoing bull market we’re seeing in shares.

Why does this inventory have millionaire-maker standing?

Manulife is strictly the sort of “boring” dividend inventory with actual capital-appreciation upside I wish to deal with. With a yield of three.6% (which has come down significantly due to the inventory’s unbelievable efficiency currently), traders are nonetheless getting bond-like yields from this insurance coverage big. And if the corporate continues to carry out because it has and sees continued earnings development, I wouldn’t be stunned to see its distributions rise over time. Thus, whereas the yield could also be 3.6% as we speak, in a number of years’ time, traders may very well be coping with a a lot bigger distribution. That’s my base case, no less than.

From a enterprise mannequin perspective, I feel there’s so much to love concerning the defensive nature of Manulife’s enterprise. With the ability to soak up premiums from its clientele and make investments these for the long run whereas paying out claims alongside the best way is a successful mannequin. World-class traders like Warren Buffett have made a profession of investing in insurance coverage firms, making the most of this float. It’s no completely different with Manulife.

Moreover, I feel the corporate’s diversified income streams considerably insulate traders from shocks and one-off results for one facet of its enterprise or one other. General, Manulife is a prime inventory, and I feel it’s value shopping for proper now and holding for the long run. I’m sticking with this view.