Monday, May 9, 2011

China Life Insurance Company Ltd. (NYSE: LFC) Q3 2011 Price Target

Recent price: 51.72$
P/E Ratio: 18.82
3 Months Target Price: 60$

Company Description
According to Reuters, China Life Insurance Company Limited is an insurance company. The Company operates its businesses through individual insurance business, group insurance business and short term insurance business, which provides individual life insurance, group life insurance, casualty insurance and health insurance products and services, such as financing insurance, children's insurance, endowment insurance and protection insurance, among others. The Company operates its businesses primarily in domestic market. As of December 31, 2010, the Company had three subsidiaries, which involved in asset management, life insurance and property insurance businesses.

Confidence Margins
Strong resistance $70.71 (+37%)
Light resistance $58.99 (+14%)
Light support $45.00 (-10%)
Strong support $40.00 (-23%)

China Life Insurance Company Ltd saw it's shares drop tremendously after the company reported it's annual results for the year 2010, confirming that the company's profit fell 22% compared to the prior year. As the drop continues, a long position for the coming quarter seems more and more attractive as the days pass. Current prices provide a patient investor with the opportunity to acquire a profitable insurer in one of the biggest Insurance markets on the planet.

Entry strategy
For the cautious investor:
Buy the stock for 52$ or less.

For the risk-taking trader:
The October 2011 52.50$ out-of-the-money call option contract seems to be the right position to take, they can be acquired for about 3.30$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 60$, or keep it until 70$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 60$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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