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Day four: trading QBE

QBE climbed to $11.32 yesterday, although tailed off into the close; my personal belief is the stock will trade in a range of $10.53 to $12.00 in the short term.

There seems to be a ‘wait and see’ approach from QBE traders at current levels, and valuation wise the stock is trading on a forward P/E (price to earnings ratio) of 11x 2014 consensus earnings, which sounds cheap, but is actually in-line with the five-year average.

Goldman Sachs posed the question today, ‘at current level is there the right sort of risk discount to compensate investors for buying the stock’?

It suggested now is not the time, unless you are significantly bearish on the AUD (QBE tends to outperform in a falling AUD environment). The stock is on attractive multiplies relative to the ASX 200; however it is now back in-line with its global peers.

I agree with this statement and also feel that if you take a long-term view then the stock is a reasonable investment, however the trading community will look at this in a different light. The fact that we haven’t seen the sort of flows you may expect from the short-term community is interesting and again plays into my view that the stock will trade in a range in the short term.

A break of $10.53 will be key though and therefore the bulls will want to see huge support at $10 hold.

QBE

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