With QBE Insurance Group (ASX: QBE) now trading sub $11, is it a buy?

QBE, is best analysed as a potential long-term core holding. So let’s jump straight there. Here is QBE’s ten year price chart, with it’s top two metrics, price to book and annual dividend.

Source: S&P Capital IQ

The key line on the chart is purple, the  price to book ratio. It tells the long term story of QBE’s powerhouse years of expansion, and the fall of recent years. Investors began paying too much for QBE in 2004. It’s hard to imagine how anyone justified buying QBE when its book value soared above 3 and then a staggering 4.

At $11 QBE’s price to book value is 1.06. On the face of it that make QBE a buy. However, just like the dividend, book value can fall, as QBE’s did in 2009. But, to be fair that was only the second fall since 1987.

At $11, QBE is priced as if its best days are behind it.
For QBE to be a bad buy at these prices its income and dividend must have peaked and forever be substantially below the average of the last four years. If, like me, you think that is highly unlikely then saddle up and take a closer look. QBE is now my top pick of the ASX20, replacing my August pick of Telstra.

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