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Linn Energy (NASDAQ:LINE) has had a challenging six months to say the least. Barron's has questioned some of its accounting practices numerous times which has been the main catalyst (the other being the rising interest rates of May through September) behind the stock's substantial decline earlier this summer.

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However, it appears the worse is over for this high yielder. Recently the company has had several positive catalysts and seems poised to reclaim the loss of stock market valuation that occurred over the summer. Its capital appreciation potential and high yield make LINE an attractive pick up for patient income investors.

Positive Catalysts:

  • Earlier in the week, the company reported solid results that came in above expectations.
  • This prompted Raymond James to state Linn "has finally turned the corner" especially given the company produced $2 million of net cash in excess of what it paid in distributions.
  • RBC Capital also commented on the solid production growth in the quarter and has an "Outperform" rating and a $38 price target on the shares.
  • Its recent acquisition of ~$500mm of Permian assets should add 10 to 15 cents annually to its distributable cash flow.

Obviously, the proposed merger with Berry Petroleum (BRY) is a huge overhang on the stock. However, I believe the worst-case scenario is pretty much baked into LINE at current levels. Approval of merger could shoot the shares substantially higher.

4 additional reasons that LINE is a solid pickup for income investors at $28 a share:

  1. Insiders certainly seem to have faith in LINE. Several have picked up over $1mm in total in new shares over the past six months. All purchases were made at higher prices than what LINE currently sells for in the market.
  2. The company is going through a significant growth phase. Revenue growth should clock in above 30% for both FY2013 & FY2014.
  3. LINE provides a distribution yield above eleven percent (11.8%). It makes monthly payouts and the company has raised payouts by greater than 80% since coming public in 2006.
  4. The median price target held by the 13 analysts that cover the stock is $34 a share, more than 20% above the current stock price.

Disclosure: I am long LINE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.