Qantas Airways Limited (ASX: QAN), QBE Insurance Group Ltd (ASX: QBE), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) are iconic businesses with global presence. Together they make up 13.69% of the S&P/ASX 200 Index (ASX: XJO) (INDEX: ^AXJO) and have 8.55 billion shares on offer.
However, as investors know, being the biggest does not always mean they're the best. Here's what you can expect from these businesses in coming years and whether, or not, they deserve your investment dollars.
Qantas Airways
Years of huge losses has forced some tough decisions upon Qantas CEO Alan Joyce. Cost cutting, off-shoring jobs and a reduction in capital spending is what managers usually do when they're thrust into the spotlight. However, intense competition from rival Virgin Australia Holdings Ltd (ASX: VAH) is forcing Qantas shareholders to see the airline industry for what it really is. One which requires massive amounts of debt, very slim profit margins and huge risk in the form of commodity risk (petroleum is a large expense for airlines), legislative risk and more.
Although Mr Joyce is promising huge cuts to Qantas' cost base and higher airfare prices (is that a good thing?), I'm not betting on a turnaround story and suggest you don't either. As Warren Buffett says: "Turnarounds seldom turn."
QBE Insurance
Like airlines, insurers have risks inherent with their business models which can swing profits to losses from year-to-year. Since 2011, QBE's claims expense has risen from $6.6 billion up to $10.7 billion and profits have followed accordingly, falling from $1.1 billion to just $380 million. However the best time to buy insurers is when they're cheapest (no surprises there). As such now could be the opportunity savvy long-term investors have been waiting for.
National Australia Bank
Despite controlling around 22% of business lending and 15.4% of household lending in Australia, NAB has struggled to keep pace with its peers because of its UK exposure which includes both the Clydesdale and Yorkshire Banks and a large portfolio of underperforming commercial property loans. Until NAB can rid itself of this exposure, I believe it's destined to underperform the market. No matter how big its dividend.
ANZ Banking Group
ANZ is, on the other hand, kicking goals for shareholders and taking strides to grow its presence in Asian markets where it sees real opportunity. Since 2007 when the bank launched its Super Regional Strategy, FX-adjusted cash earnings from overseas markets has grown to over 19% of the entire bank. Locally, it's making a well-timed push into both business lending and mortgages. Although I'm expecting big things from the bank in coming years, I'd rather see a lower share price before hitting the 'Buy' button.
