Travelers Keeps Up Dow Weight as Shares Shrink: Chart of the DayDavid Wilson
Travelers Cos. may have done more to sustain its place in the Dow Jones Industrial Average than any other company since joining the 30-stock gauge in June 2009.
The CHART OF THE DAY shows how to draw this conclusion: by tracking the drop in the amount of Travelers stock outstanding during the period. The data was compiled by Bloomberg from the property and casualty insurer’s quarterly financial statements.
Travelers ended last year with 33.5 percent fewer shares than the New York-based company had 3 1/2 years earlier. The decline was the biggest for a component of the Dow average, Bloomberg’s data showed.
Repurchases explain why the so-called share count plummeted. Travelers bought back 22.4 million shares last year for $1.45 billion, according to an earnings report released two days ago. Buybacks were suspended after Hurricane Sandy hit the U.S. northeast in October and resumed last month.
Property-casualty companies often repurchase shares, Scott Krisiloff, chief investment officer at Avondale Asset Management in Los Angeles, wrote on his firm’s blog two days ago. The posting highlighted Travelers’ share count.
“The name of their game is to grow book value per share,” or the value of assets after subtracting liabilities, he wrote. “To that end, they are not bashful about buying back stock when they don’t have a more efficient use for capital.”
Buybacks can raise the share price, which determines how much weight a company has in the Dow industrials. Travelers had the eighth-highest weighting, 4.3 percent, as of yesterday even though it was the second-smallest company by market value. Only Alcoa Inc. was less valuable.