The week started on a positive note as Pfizer (PFE) and BioNTech (BNTX) announced on Monday that their prospective vaccine was effective in more than 90% of patients.
Building on confidence that there is light at the end of the COVID-19 tunnel, the S&P 500 moved 2% higher, led by Energy and Financial names. The Dow Jones Industrial Average doubled that performance this week, while the Nasdaq Composite fractionally fell.
It may no longer be the top news story in the financial press, but the coronavirus pandemic is still with us.
In addition to the positive vaccine news on Monday, the Food & Drug Administration granted emergency approval for Eli Lilly’s (LLY) antibody treatment.
Both items are welcome news. The U.S. has reported more than 150,000 new COVID-19 cases each of the past three days. Meanwhile, several states are enacting new stay-at-home orders.
If the pandemic continues to spread, it could hamper the positive trajectory of the economic recovery reported in recent months.
What to Expect Next Week
Retailers will dominate the earnings calendar this week, with the likes of Home Depot (HD), Target (TGT) and Wal-Mart (WMT) scheduled to post quarterly results.
On the economic front, we’ll get the October retail sales report on Tuesday. Additionally, we’ll receive several looks at the current state of the housing market.
Following the snap-back recovery in stocks from March lows, we believe that investment gains will be harder to come by in future months.
As a result, deciding what and when to buy can be challenging for any investor.
However, the fact remains that attractive investments are out there, if you’re willing to dig a little deeper.
One such Financial name is worth a closer look and is our Stock of the Week.
Stock of the Week: Lincoln National (LNC)
The company sells life insurance and provides retirement planning services, through investment products such as annuities.
The stock gained 22% this week and we believe this momentum can continue throughout the final two months of 2020. Here’s why:
For starters, management announced quarterly results on Nov. 4 that beat expectations. Lincoln National earned $2.12 a share in the third quarter, as revenue grew 2% from the previous year, to $4.79 billion. The company is leveraged to rising interest rates and management is also keeping a tight lid on costs.
In addition, Lincoln National boosted the quarterly dividend earlier this month to $0.42 a share (4% yield). Management will make its next payout on Feb. 1, 2021, to investors at the close of trading on Jan. 7.
The company has a stable business and A-rated balance sheet, but is also growing earnings at a steady clip. The consensus analyst estimates call for annual profit to more than double over the next two years.
The stock is valued at just 4.3x expected full-year profit of $9.63 a share, which is a discount to the industry average of 6.7x. The company also trades at 0.7x tangible book value, which is below the industry average of 1.05x.
FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.