The Dow Inches Higher As Travelers Hits New All-Time High; J&J, Pfizer Also Gain

Modest gains in the Dow Jones Industrials started a winning streak for the average.

May 22, 2014 at 9:05PM

On Thursday, the Dow Jones Industrials (DJINDICES:^DJI) gained 10 points, lagging behind the percentage gains in the broader market but still adding to its triple-digit advance from Wednesday. Investors seemed content to ride the ongoing wave of optimism higher, especially as it now appears that the Federal Reserve will avoid premature moves to tighten monetary policy. Among the Dow's 30 component stocks, Travelers (NYSE:TRV) hit a new all-time high, while Johnson & Johnson (NYSE:JNJ) fell just short on a technicality, and fellow pharma stock Pfizer (NYSE:PFE) also picked up ground.

Travelers gained only about 0.2%, but that was enough for the stock to hit a new all-time closing high. For more than a year now, Travelers has enjoyed the fruits of good fortune, as a long string of powerful and damaging storms in past years gave way to a period of relative calm. As a result, Travelers' loss experience has been extremely favorable lately, allowing the company to enjoy massive profits. Yet even though Travelers' current earnings multiple of 9 makes it seem like a dirt-cheap stock by some measures, Travelers investors need to keep in mind that even a return to normal loss conditions in the property and casualty insurance market will cause earnings to drop from their current levels. Nevertheless, with prospects for stability in the bond market also supporting Travelers' financials, the stock has room to climb higher until the next big storm hits.


Johnson & Johnson rose half a percent today, and were it not for the stock having gone ex-dividend, today's close would have been an all-time record high for J&J as well. This morning, Johnson & Johnson announced its plans to bolster its medical-device and diagnostics business, an area that has been overshadowed by the strong growth on the pharmaceutical side of J&J's business. Yet the Dow component is the worldwide leader in medical devices and diagnostics, and Johnson & Johnson recognizes the need to keep investing in research and development in order to sustain its pipeline of more than 30 products for which filings are expected over the next two and a half years. In particular, J&J has targeted emerging markets as a source of strong growth, and even though it already gets more than 20% of its revenue from emerging markets, boosting that total could help move the needle for the entire company.


Pfizer gained 0.3% as news continues to swirl about its failed takeover attempt of British drugmaker AstraZeneca. The latest news involves a major institutional investor in the British drug giant that supported the rejection of Pfizer's bid but believes that future talks could be productive. It's unclear how long Pfizer would wait for a possible deal, though, and given the massive size of the proposed buyout, Pfizer likely won't keep the window on a merger open indefinitely. If the bid eventually does fail, it'll mark a missed opportunity for Pfizer, but the pharma company has plenty of room for other growth moves down the road.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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