ying and yang, page-29

Rice,

As others have stated, QBE is a long-term stock for the majority of portfolios. I see currency headwinds for several years which will likely mask the outstanding underlying business performance. I think it is likely that the share price may not fully recognise the business performance whilst currency headwinds prevail. Having said that, will that be 2 years, 3 years, 10 years until we see the currency return to a longer-term average? How high will it go? Will it be $1 by Christmas?


So you are asking whether the price will fall in the near-term. I don't see that this is a question that you, I, or the next person could answer. The short-term movements are certainly unlikely to be dictated by QBE's underlying business. Until the next profit/business update, I don't see any fundamental reasons driving the share price down.

Could the currency hitting $1 mean that QBE will fall to your target price? I don't believe the market is so efficient as to price in every change, but of course that yes it could. That doesn't mean it will. Perhaps you need to look at multiple potential investments, and hope that one of them reaches your target price, because there is no guareentee that QBE will.

It's questionable as to whether QBE is likely to be a stock that outperforms over the next 2 years? Let us assume it takes longer than 2 years for the American/European economy to get going, would there not still be a currency headwind in 2 years? If I was you, I would be concerned that the timeframe of 2 years would be too short.


Ben Graham reckoned ' in the short-term the market is a voting machine, in the long-term it is a weighing machine'.

It's a really insightful quote into the workings of the market, one that you could consider for your current decision.