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QBE Insurance (ASX:QBE) has landed in the spotlight this week, not for its stellar performance but for a lawsuit filed by the ASIC.
The case alleges QBE misled half a million customers about pricing discounts on their insurance policies.
But in a twist few saw coming, the stock price surged 17% following the announcement on October 23. This is a stark contrast to the fate of other ASX-listed companies, like Star Entertainment Group (ASX:SGR) and Telstra (ASX:TLS), where shares tumbled when hit with legal and regulatory challenges.
So, with investors seemingly quite undeterred, the question is: Could QBE actually be a golden opportunity for your portfolio now?
Operationally, QBE is firing on all cylinders. The company has been laser-focused on improving underwriting performance and minimising volatility, particularly in its North American division.
These efforts have paid off handsomely. In its FY24 half-year results, QBE posted a statutory net profit after tax of $802 million, doubling the $400 million reported the previous year.
The momentum didn’t stop there — Q3 FY24 gross written premiums climbed 2% year on year, reaffirming its full-year guidance of approximately 3% growth. From a fundamental perspective, QBE looks set to charge full steam ahead into 2025 with solid metrics and strong momentum.
Turning to the charts, QBE’s share price has been on an incredible run, skyrocketing over 30 per cent since September. Naturally, some profit-taking has emerged, and all eyes are now on the $18 support level, where buyers could step back in.
Legal battle looms
Yet, the looming question is how QBE will navigate its legal battle.
While the market has shrugged it off so far, the outcome could still influence sentiment.
Investors should closely monitor both the stock’s performance and the company’s financial results in the coming quarters.
With strong fundamentals and a resilient share price, QBE is shaping up to be an Australian stock worth watching as its story unfolds.
Best and worst-performing sectors this week
The best-performing sectors include Materials, up over one and a half per cent, followed by Consumer Staples, which was up under half a per cent. Consumer Discretionary fell more than half a percent.
The worst-performing sectors include Information Technology, down over 5%, followed by Financials, down over 2%, and Industrials, down more than 1.5%.
The best-performing stocks in the ASX top 100 include Mineral Resources (ASX:MIN), up more than six per cent, followed by Pilbara Minerals (ASX:PLS) and Whitehaven Coal (ASX:WHC), both up over 4%. The worst-performing stocks included Ramsay Health care (ASX:RHC), down over 8%, followed by HUB24 Limited (ASX:HUB) and IDP Education Limited (ASX:IEL), both down over 7%.
What’s next for the Aus stock market?
This week, the All-Ordinaries Index faced more consolidation, with sellers maintaining control and pushing the index down more than a percent. But let’s not hit the panic button just yet.
History reminds us pullbacks are a natural part of sustained uptrends, often setting the stage for stronger comebacks. Look no further than the corrections we saw in April and October this year – only for the market to rally to fresh highs shortly afterwards.
With the index currently hovering around the 8,600 level – watch for potential buying to emerge, as this level is a critical zone that has repeatedly served as both support and resistance in the past. If 8,600 fails, then 8,300 points is the next likely target for buyer activity.
Now: About that elusive 9,000 mark – it’s not completely off the table for 2024, but December’s seasonal strength will need a serious boost. Retail sales data, coupled with ongoing Chinese stimulus talk, might provide the spark.
A renewed surge in Consumer Discretionary stocks and Materials could spill over into the Financial sector, creating a ripple effect that would drive the broader market higher.
Looking ahead to January
January often ushers in fresh optimism, and another strong rally in the New Year wouldn’t come as a surprise.
For now, this pullback presents a golden opportunity to refine your stock picks, capitalise on better entry points, and position yourself for the rally’s next phase.
For now, good luck and good trading.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au.
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