QBE Insurance Group Ltd (ASX: QBE) is one company that benefits when the Australian dollar (AUDUSD) is falling.
Falling Aussie Dollar
The AUD is currently trading near its 10 year low. With the likelihood of further interest rate cuts from the RBA before Christmas, the Aussie dollar may come under further pressure yet. Falling property prices and the flow on effects it may have for the economy is also a likely source of weakness for the Aussie dollar.
Westpac released a statement last week stating that they forecast the AUD could soon fall to US$0.66 on the back of three rate cuts between now and November.
Whilst a falling Aussie dollar is not so good for your overseas holidays, it is great if you own companies that generate a significant portion of earnings offshore.
QBE Finally Turning Around?
With a market cap in excess of $15 billion, QBE is the second largest ASX listed insurer behind fellow industry heavyweight Insurance Australia Group (ASX: IAG), generating a meaningful amount of revenue in USD.
QBE has been a constant frustration for investors ever since the GFC, plagued by multiple write-downs as their aggressive acquisition strategy failed to meet expectations.
A new CEO, Patrick Regan, was appointed in 2018 and quickly announced plans to simplify the business, improve operational efficiencies and sell-off underperforming segments. This helped the company turn a US$1.25 billion loss in 2017 into a US$390 million profit in 2018.
Analysts at investment bank Macquarie Group Ltd (ASX: MQG) released a note this week downgrading its rating on QBE to ‘neutral’. This was likely the catalyst for the share price falling 3.6% yesterday.
Is The Pullback An Opportunity To Buy?
I have been burnt by the QBE turnaround narrative in the past and as a result, remain highly sceptical. However, there are promising signs that the business has managed to streamline its operations, in turn clearing out much of the dead wood. I will be waiting to see further confirmation of the turnaround via company results before I look to include it in my portfolio.
3 Proven, Dividend-Paying Shares
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Disclosure: At the time of publishing, Luke does not have a financial interest in any of the companies mentioned.
