By Alexander J. Poulos:

Hartford Financial Services group (HIG) has been in the spotlight recently with John Paulson agitating for a breakup. Paulson is a successful hedge fund manager and is currently Hartford Financial’s largest shareholder with an 8% stake. The focus of this article will be an option strategy using deep in the money leaps to create a synthetic long position that appreciates nearly dollar for dollar with the underlying shares.

Hartford Financial is a large multi-line insurance company based in the United States. Hartford Financial faced a near death experience in the financial meltdown of 2008 and has barely recovered. Hartford Financial has a book value of over $50 which is drawing institutional interest. At a current share price of roughly $22 a share, there is perceived value inherent in the shares.

Key Valuation Ratios

P/E (TTM)

11.40

P/Sales

0.44

P/E (Forward)

6.38

P/Cash Flow

9.65

Earnings/Share (EPS)

1.9

Book Value/Share

50.15

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