Prudential Insurance or Lincoln National Stock: Which is the better choice when it comes to quasi-cap-gain?


Business on Wall Street in Manhattan

Pgiam/iStock via Getty Images

Investment thesis

It is a comparative analysis of security prices resulting from investors’ expectations already produced by careful examinations of current or future economic, competitive and managerial actions and influences. The focus is on stock prices, not underlying causal minutiae well assessed by those knowledgeable and able to handle this level of input.

We are looking to see how actual market price results have tracked past assessments of the balance between price risk and price reward where this balance in daily comparisons over the past 5 years has been as seen now specifically for Prudential Financial, Inc. (NYSE: PRU) and for Lincoln National Corporation (LNC). Issues of credibility, frequency, balance and size of forecasts in each direction can all matter in comparisons with alternative investment candidates with similar competitive circumstances and frequent investor referrals.

First description of the company

“Prudential Financial, Inc., together with its subsidiaries, provides insurance, investment management, and other financial products and services in the United States and internationally. It operates through eight segments: retirement , group insurance, individual annuities, individual life, IQ Insurance, International Businesses and Closed Block.The company offers investment management services and solutions related to public fixed income, public equities, debt and real estate equities , private credit and other alternatives. The company offers its products and services to individual and institutional clients through its proprietary and third-party distribution networks. Prudential Financial, Inc. was founded in 1875 and is headquartered in in Newark, New Jersey.

Source: Yahoo Finance

Street analyst growth estimates

Yahoo finance

Description of the alternative investment company

“Lincoln National Corporation, through its subsidiaries, operates several insurance and retirement businesses in the United States. It operates through four segments: annuities, retirement plan services, life insurance and group protection. The company distributes its products through consultants, brokers, planners, agents, financial advisers, third-party administrators and other intermediaries. The Lincoln National Corporation was founded in 1905 and is headquartered in Radnor, Pennsylvania .

Source: Yahoo Finance

Street analyst growth estimates

Yahoo finance

The risk-reward balances of investment candidates

Figure 1

MM Risk and Reward Forecasts

(Used with permission)

The trade-offs here are between short-term upside price gains (green horizontal scale) considered worth protecting by market makers with short positions in each of the stocks, and past actual price declines experienced during of the holding of these shares (red vertical scale) . Both scales are percent change from zero to 25%.

The intersection of these coordinates with the numbered positions is identified by the stock symbols in the blue field to the right.

The dotted diagonal line marks the points of equal upward price change predictions derived from Market-Maker [MM] hedging actions and actual worst-case price declines from positions that could have been taken as a result of earlier MA predictions like today’s.

Our main interest is the PRU on site [1] and the secondary interest is in LNC at the location [7]. A standard “market index” of reward~risk trade-offs is offered by SPDR S&P500 index ETF (SPY) also at [9].

These predictions are underpinned by the self-protective behaviors of MMs that typically need to put company capital at temporary risk to balance the interests of buyer and seller by helping capital-intensive portfolio managers adjust multi-billion dollar portfolio volumes. Their protective actions daily define the magnitude of likely expected price changes for thousands of stocks and ETFs.

This map is a good starting point, but it can only cover some of the investment characteristics that must often influence an investor’s choice of where to invest their capital. The table in Figure 2 covers the above considerations and several more.

Compare alternative investments

Figure 2

Detailed comparative data

(Used with permission)

Column price range prediction limits [B] and [C] be defined by MM’s hedging actions to protect the firm’s capital which must be exposed to the risk of price changes from volume trade orders placed by large $”institutional” clients.

[E] measures the potential upside risks for the short MM positions created to fill these orders and rewards the potentials for the buy positions thus created. Past forecasts like this provide a history of relevant risk of lower prices for buyers. The most severe actually encountered are found in [F]during the periods of maintenance in the effort to reach [E] earnings. This is where buyers are most likely to accept losses.

[H] indicates what proportion of the [L] sample of similar past predictions made gains by causing the price to reach its [B] target or be above sound [D] cost of entry at the end of a maximum holding period limit of 3 months. [I] gives the net gains-losses of those [L] experiences and [N] suggests how much [E] can be compared to [ I ].

The historical samples are specific to each stock, with forecast dates of the balance between rise and fall of each being like that observed today. A minimum number of past experiments on the possible daily forecasts of importance for the last 5 years is set at 15. The pink backgrounds of [T] for the AFL and MFC warn of their failure now at current RI levels.

Other reward-risk trade-offs involve the use of [H] win odds with loss odds 100 – H as weights for N-conditioned [E] and for [F]for a combined yield score [Q]. The typical job retention period [J] to [Q] provides a symbol of merit [fom] ranking measure [R] useful in portfolio position preference. Figure 2 is ranked by row on R among candidate stocks, with BRKR in first place.

In addition to candidate-specific stocks, these selection considerations are provided for the averages of some 3,300 stocks for which MM’s price range predictions are available today, and 20 of the top-ranked (per of) of these forecasts, as well as the forecast for the S&P500 Index ETF (SPY) as a proxy for the stock market.

What makes LNC the most attractive within the group today is its ability to deliver profits most consistently at its current operational balance of share price risk and reward. As shown in column [T] in Figure 2, these levels vary considerably from stock to stock. The range index [G] indicates where today’s price stands in relation to the MM community’s predictions of the upper and lower bounds of future prices. With LNC at an RI of just 3, 97% of the range is up, and the English (UK) version of PRU (PUK) the imbalance advantage is even greater with a current market of 2% in below the bottom of its forecast range for an RI of -2.

What matters is the net gain between the investment gains and losses actually realized following the forecasts, shown in the column [I]. The odds of winning [H] indicates what proportion of the sample IRs of each stock was profitable; 87% by LNC, 62% by PUK and only 61% by PRU. Net gains [I] CAGR products [K] 39% by LNC, 26% PUK and only 14% by PRU when the average holding periods [J] of these sample-induced predictions are included.

Recent Trends in MM Price Range Predictions for PRU

picture 3

MM Price Range Daily Forecast

(Used with permission)

This picture is do not a “technical table” of past prices for the PRU. Instead, it’s the last 6 months of daily price range predictions of market actions to come in the coming months. The only past information is the stock price closing point on the day of each forecast.

This data divides the opposite predictions of the price range into bullish and bearish outlooks. Their trends over time provide additional insight into upcoming potentials and help keep perspective on what might be coming.

The small image at the bottom of Figure 3 is a frequency distribution of the daily appearance of the Range Index over the last 5 years of daily forecasts. The range index [RI] indicates how much of a decline in the forecast range occupies that percentage of the entire range each day, and its frequency suggests what might look “normal” for that stock, in the eyes of evaluators.

Here, the current level of RI is near the mid-range, indicating that higher levels (and prices) could be reasonably expected. If this starts to happen, its advance may eventually reach a point where the PRU price begins to “swim upstream” as a more frequent future event.

The parallel picture now for LNC in Figure 4 provides a situation where strong upside expectations have risen and still have considerable headroom.

Figure 4

MM Price Range Daily Forecast

(Used with permission)

The small lower image here in Figure 4 shows the past strong incidence of larger range indices, typically with higher market prices.


Of these alternative investments explicitly compared, Lincoln National Corporation seems to be a logical buying preference over Prudential Financial, Inc. for investors looking for short-term capital gain.


Comments are closed.