Will The Travelers Companies Weather the Storm?
With shares of The Travelers Companies (NYSE:TRV) trading at around $73.06, is TRV an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
When it comes to property & casualty insurance, investors hope for non-events so they can collect their dividends and be on their merry way. It’s even better when industry stocks move at a more rapid pace than expected, which has been the case over the past three years. The future is likely bright for Travelers, but Sandy might not be through wreaking her havoc.
Travelers has a lot of exposure on the east coast, and there is no telling what the financial damage might be for the company. There are reports that losses will be in the billions, but that’s still a very broad statement. On a positive note, most people don’t have flood insurance. This limits the damage. Even though one death is one too many, it should be noted that the death toll wasn’t as high as expected, which is another plus. Simply put, the biggest factor for near-term stock performance relates to Hurricane Sandy. We will soon know more about the financial damage.
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One completely different type of storm that Travelers weathered well was the financial crisis of 2008/2009. The stock dropped, but not nearly as much as others. Dividend payments also helped investors get through. It didn’t take long for the stock to rebound and climb higher. This is important considering many other stocks still haven’t recovered. It shows the strength of the company.
What also shows the strength of the company is that Fitch recently reaffirmed the company’s Issuer Default Rating at A+. This increases creditworthiness in the market and boosts investor confidence. Other positives include a Forward P/E of 10.68, solid margins, and operating cash flow over $3 billion.
Let’s take a look at some more important numbers.