Lincoln shares are up 92% year to date, leaving red hot Internet stocks like Amazon (AMZN) and Google (GOOG) in the dust and even eclipsing Facebook (FB - Get Report).
But while Amazon trades at 1,363 times earnings, Google is at 31 times earnings and Facebook is at 100 times earnings, Lincoln still trades at a puny 11 times earnings, well shy of the 17 times earnings that is the average for the S&P 500.
Which isn't to say such comparisons should guide a decision to invest in Lincoln. Lincoln's success stems largely from growth in its annuity business, which can't continue indefinitely. Facebook, by contrast, has no limits to its growth if it can keep its users engaged and find new ways to make money off of them. While that is no easy task, it isn't impossible either, and the potential rewards are limitless.
Still, Lincoln CEO Dennis Glass sounded like a raging bull at the Goldman Sachs financial services conference Wednesday as he looks ahead to 2014, in sharp contrast to other financial services executives like Bank of America (BAC) CEO Brian Moynihan, or Wells Fargo (WFC) boss John Stumpf, who were far more measured in their forecasts.
Here is an excerpt from Glass's presentation:
The industry is probably as well positioned in 2013 for growth as it has been for a long time, and I say that for a couple of reasons. First, a lot of the industry earnings come from equity assessments. As equity markets rise, our earnings go up, and I expect that to be continuing at some pace. A lot of the industry earnings come from interest margins. Expect interest rates to be going up, so that'll push earnings. Consumer demand going from capital markets to consumers. The demographics are in favor of our industry particularly the baby boomers and the baby boomers' preferences for guarantees which is what our industry provides, long-term guarantees. It's increasing, so there's increasing demand.
But probably the most telling, most interesting thing, recent market development, is that the industry has repriced its products increasing across four variable annuity products, long-term guarantee, universal life and just about every product in the portfolio has been repriced with a higher price, and in fact, across the industry we're selling more product. And so, the demographics are favorable, capital market trends are favorable, and people are paying more for our products. So, that's a pretty good situation.
And that's just the industry dynamics. Glass argues Lincoln "focused on the fastest-selling segments in the businesses that we're in," such as "the group business where we're concentrating on...employers with 1,000 or fewer employees. The growth rate in that market is probably 7% or 8% versus the overall growth rate in a group market which would be half of that. Similar situation in the retirement business. So, yes, we participate broadly in the markets that most of the -- our competitors compete in as well, but we pick specific segments."
-- Written by Dan Freed in New York