Sydney based insurer QBE is a stock many investors love to hate which is no great surprise considering it was trading above $35 before the GFC but we all know it’s a beneficiary of rising interest rates, the question is has it become expensive compared to many other battered stocks/sectors. MM has described the stock as a “serial underperformer” in the past concerned about the ‘black box’ nature of its earnings i.e. so many complex and moving parts, but it’s been performing solidly this year as a new economic picture evolves and it simply feels strong.
The company is enjoying both strong revenue from premiums and investment yields ahead of analysts’ expectations which reads well for FY22 earnings, also the company’s US and European peers have been performing nicely due to margin expansion. When we combine the performance of the business with industry and the macro tailwinds MM can see why UBS like QBE through 2022, on the surface the risk/reward is average but importantly the downside appears limited in today’s volatile market.
MM is bullish QBE initially targeting over $13
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