Lincoln National Is in an Uptrend

Posted Dec 18th 2009 11:40AM by Joseph Lazzaro
Filed under: Stocks to Buy

Lincoln National Corp.'s (LNC) steadily-improving performance means it is a financial services/insurance play with an attractive valuation, which is a major reason I'm reiterating my buy rating for the company's shares, first recommended on June 18, 2009, at a price of $15.92. If you bought LNC in June, you're up more than 50%.

A combination of a $2.1 billion stock offering, participation in the TARP program, and a stock market rise that has improved the capital position of Lincoln National's variable annuity guarantees, has brightened the skies for Lincoln.

Further, look for a healthy revenue increase in Lincoln's term life and universal life insurance businesses in 2010. Meanwhile, an improving employment situation -- numerous defined contribution-offering companies are expected to resume hiring in 2010 -- bodes well for Lincoln's defined contribution unit.

The First Call FY2009/FY2010 EPS estimates for LNC are $3.14 to $3.49. That $3.49 FY2010 EPS estimate will likely prove to be low.

Technically, LNC's stock chart is strong -- an uptrend, and a recent pull-back to $24-25 is a buy opportunity. Lincoln will encounter psychological resistance at $30, but this should prove to be minor. According to my analysis, Lincoln is headed north and should approach $40 by the end of 2010.

Stock Analysis: Lincoln Financial Corp. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in LNC now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your LNC position before February 2010. Sell/Stop Loss if you were to buy shares in this company: $14.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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