Monday, July 2, 2012

Lincoln National Downgraded For Being Too Cheap

Ok, Barclays Capital didn't downgrade Lincoln National (LNC) for being too cheap. One has to wonder if the stock trading around .4x book value actually played a roll. Or maybe these analysts just use recent history as a basis for price targets.

Honestly don't understand how a price target below book value could ever be justified. The company has made at least a $1 in each of the last 4 quarters and trades at 4.7x forward estimates. In what book is that a stock to sell?

Even worst is the Daily Political website throwing in the P/E ratio of 30 to make the analyst call appear smart. Not sure why that website is even commenting on stocks, but it had the most detail that I could find on the downgrade.

While the stock is down 3% today, the bounce off the 10ema will be bullish if it holds. Also, the stock came close to closing the gap from Friday just below $21. Anybody buying at these levels at least has limited risk if it goes ahead to fill the gap today or sometime this week.

Figure - LNC 8 Month Chart




















With the financial crisis over in the US and a lot closer to the end in Europe than the company perception, Lincoln National appears to be an ideal buy. If anything this downgrade might just signal the launching pad is primed.

The company officially had a book value of $46.43 at the end of Q112. This value should be higher after Q212 earnings of around $1 not to mention the potential for below book value stock purchases. Why would anybody downgrade this stock at $22?


Disclosure: Long LNC and looking to add more. Please review the disclaimer page for more details. 




No comments: