QBE – Algo Buy Conditions

QBE Insurance Group is under Algo Engine buy conditions and is a current holding in our ASX 100 model portfolio.

Recent earnings update shows QBE delivering ahead of consensus. Growth should remain strong and upgrades to 2020 earnings are now likely. The balance sheet remains robust, with A$1bn buyback over three years being executed.

Higher yields in US treasuries are helping to lift investor sentiment towards QBE and financial stocks in general.

Buy QBE and look for a move into the $13.50 price range.

Keep QBE On The Radar

After trading as high as $10.50 on May 18th, shares of QBE have dropped over 10% and reached $9.25 last week.

However, the share price got a lift on Thursday after UK Ratings agency, A.M. Best affirmed its Financial Strength Rating to A, and its Long-Term rating to a+.

At Friday’s closing price of $9.41, QBE is trading at a P/E of 13 and the 22 cent dividend on August 24th places it on a yield of 5.10%.

Our ALGO engine triggered a sell signal on QBE at $10.30 on May 3rd. We expect that signal to reverse soon and will advise on entry levels in a future posting.

QBE

 

 

 

 

 

BoA Slips Lower On Weaker FICC Growth

Bank of America reported a 34% rise in first-quarter profit last night, topping Wall Street estimates, as the bank benefited from higher interest rates and growth in loans and deposits.

However, BAC under-performed in fixed income, currency and commodities (FICC) trading because of a decline in bond issuance from corporations.

Trading revenue was up only 1%. Equities trading revenue, excluding items, rose 38%, while revenue from trading fixed income fell 13%.

BAC’s trading results mirrored those of rivals JP Morgan and Citigroup; revenue from stock trading rose at both the banks, but weakness in bond trading crimped total trading revenue growth, which is why their share prices remain soft.

To a large degree, the local banks face the same headwinds but with the added risk of the Royal Bank commission.

Hearings from the commission are back on this week with QBE and SUN included in the questioning over insurance related business practices.

Our ALGO engine triggered a sell signal late last year in both QBE and SUN at $10.40 and $14.05, respectfully.

We remain cautious of the local banking names and see the risk continue to be skewed to the downside, especially in the regional names like BOQ and BEN.

QBE

SUNCORP

BoQ

Bendigo Bank

 

March Quarterly Index Review

It’s always interesting to look at the index re-balancing and think about the names that have been removed or added in the index rankings.

QBE has a negative price structure and an Algo Engine sell signal.

S32 has an Algo Engine buy signal and is a core holding in our ASX Top 50 model Portfolio. As of  March 19th, S32 will now move into the ASX Top 20 model.

We suggest readers look at the charts of the two new additions to the ASX100 index, CWY and XRO.

 

QBE Rebounds After Yesterday’s Warning

Despite warning investors about a potential US 1.2 billion full year after tax loss, shares of QBE are over 4% higher at $10.90.

After dropping over 6% to $9.85 yesterday, it seems investors looked past the headlines and saw value in the company going forward.

Much of this optimism was based on the one-off charge of US 230 million on the value of deferred tax credits in the USA and a US 700 million impairment charge.

Our ALGO engine triggered a sell signal in QBE  at $11.00 on October 24th.

With the daily chart still dominated by the “lower high” pattern from mid-August, we consider QBE a reasonable stock for a BUY/WRITE strategy.

QBE Insurance

 

 

 

 

 

QBE Is Approaching Technical Resistance

With 30% of QBE’s insurance business in North America, the 20% drop in the share price after Hurricanes Harvey and Irma now looks excessive.

It’s estimated that the net impact of these events for QBE was $600 million, comfortably short of the $1.1 billion gross costs implied as the storms made landfall.

However, based on after-tax earnings of the Australia and New Zealand operations only, we estimate that QBE’s 2H17 dividend will fall from 33 cents per share down to 10 cents.

After posting an intra-day low of $9.65 on October 3rd, the share price has recovered back over $10.80 in early trade.

In our view this bounce back is approaching technical resistance and internal momentum indicators are suggesting a move lower in the near-term.

Investors should exit long QBE positions and look to reenter in the lower $10.00 handle.

QBE

 

 

 

QBE – $1billion Share Buy-Back

On account of heightened claims activity in QBE’s Emerging Markets (EM) division, QBE has downgraded its FY17 guidance.

However, we remain optimistic regarding the QBE turn-around and feel the cycle is bottoming for QBE and the outlook is encouraging.

With the stock trading 10x forward earnings and 6% yield, along with a 3-year A$1bn buy back, which was announced in February, QBE is worth adding to your watchlist.

QBE is likely to commence their share buy-back program by late August 2017 and buying ahead of this time should be rewarded with higher prices into 2018.

Chart – QBE

 

 

QBE & IAG

We’ve been buying QBE and IAG over the past few weeks. further upside is likely to be limited from the current level and therefore, taking profit or selling covered call options is advised.

Chart – QBE
Chart – IAGBE