The value story? Lincoln, a financial management and life insurance company, appears to be stabilizing. Liquidity and capitalization concerns have been reduced as a result of Lincoln's recent 40-million-share, $15 per share offering. Further, chatter regarding a probable exercise of a greenshoe option of up to six million shares adds to the improving LNC story.
True, analysts see the original 40-million-share offering as about 20% dilutive, but it supports the argument that management is successfully addressing liquidity and capital concerns. Add an economic recovery tailwind, and the view from here argues that LNC is worth a play at these price levels ($13-17), but the stock is not for the squeamish. Low-risk and moderate-risk investors should not consider LNC.
Stock Analysis: Lincoln Financial is a high-risk stock. Consider buying a 25% position in LNC now; then buy another 25% in four months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your LNC position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $9.25.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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