QBE’s recent price action has been very detached from the...

QBE’s recent price action has been very detached from the general market. Underperformed the XAO in the last 3, 6 and 12 months by 13%, 33% and 40% respectively.

QBE must show a return to 1 billion net profit in 2014. If it does, then the current share price is low and has good upside potential.

If for some reason QBE does not show a 1 billon profit for 2014 and comes in significantly less, the share price is likely to visit $10 again and in a the case of yet another profit warning or loss announcement, the share price will finally break below $10, where is has found support on 3 occasions during times of severe negative sentiment towards the stock.

All well when he or she is driving the share price up, but a part of the CEO’s responsibility and pay would be to ensure a company’s market cap doesn’t take a 7 year decline over on the other side. Short term declines inflicted by general market panic or soft general economy is ok, but declines that are being caused by damage to company fundamentals that is lasting way longer is not ok. Surely the CEO could feel there was potential risk to the company from some of the acquisitions that were being made. If it is not the CEO that should feel risk and steer the company clear of risk, then who is it? The position of CEO and the salary paid should be taken seriously. There is a reason why QBE cannot invest its large pool of policy money in stocks. I think there is a requirement for that pool of money to be invested conservatively, such as in bonds. Poor returns but at least it will not cause a 70% loss. Sure the former CEO grew the company share price, but temporarily and clearly in an unsustainable way, failed to be conservative and manage risk and I feel there is negligence on behalf of the previous CEO and he should be accountable. But he doesn’t have to care anymore.

Back to the chart. I like the type of decline that took place 5-19 May - an accelerated drop down to $10.94 (-8% in 10 days). I now see some promise or some positive language being spoken by the chart after the May 19 low of $10.94. The price is now trying to hold above the 10 day MA – a prerequisite I feel, just before an uptrend.

According to my view of the chart, this stock is going to make a move inside of 5 trading days. The move is likely to be up. Although it closed at its low yesterday, today it did the right thing by opening higher. Now needs to get back quick above the 10 day MA again.

The June 11 conversion date of convertible debt securities is also nearing and seems to be meshing well with the chart. It reached $13 in March after the December plunge. And I think $13.00 is inevitable again and probable by September 2104, where it may even outperform the market in that time.