Why we love this cheap ASX 200 share: Wilson

This company has just hit a 52-week high, but is set to continue its climb, reckons these portfolio managers.

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One ASX share is set to soar from its unique position within the S&P/ASX 200 Index (ASX: XJO), reckons a trio of portfolio managers.

Wilson Asset Management executives Matthew Haupt, Catriona Burns, and Oscar Oberg this week revealed their bullishness on QBE Insurance Group Ltd (ASX: QBE).

“QBE is a Sydney-headquartered general insurance and reinsurance company with 27 offices worldwide — the only truly global insurer in the ASX 200,” they wrote in an email to clients.

Wilson holds QBE in its WAM Leaders Ltd (ASX: WLE) listed investment company. 

Here are the reasons for their optimism.

Financial shares currently in favour

WAM Leaders has been overweight on the finance industry the last two quarters.

Haupt, Burns and Oberg cited the cyclical nature of these shares and their trading on “undemanding valuations” for their exposure.

“Exposure to real activity will be critical for outperformance when monetary policy is wound back, which we expect will be signalled from central banks in the coming months.”

As this happens, the portfolio managers noted money will move out from “companies artificially inflated by monetary policy”.

“We are confident in the outlook for cyclical stocks.”

Strong tailwinds for insurance

The insurance sector specifically has some forces working in its favour in the medium-term, according to the WAM memo.

“Tailwinds for QBE include the strong premium rate cycle globally, driving higher top-line growth in the coming years,” the portfolio managers said.

“Given their reliance on investment income, general insurers are also highly leveraged to bond yields, should these rise.”

It seems brokers at UBS agree with the Wilson managers. Last month the Swiss firm retained its ‘buy’ rating for QBE while upgrading the price target to $11.50.

QBE hit a new 52-week high in intraday trading on Friday, climbing 2.16% to $11.37 before closing the session at $11.33. But that’s still way below its pre-COVID high of $15.13 reached in February last year.

“QBE is trading at a discount to its peers such as Insurance Australia Group Ltd (ASX: IAG), and below its historical average.”

The insurance company now known as QBE started in 1886 as the North Queensland Insurance Company. The business now employs more than 11,000 staff in 25 countries.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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