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Why Travelers, Visa, and IBM Missed the Dow's Record Run This Week

The Dow Jones Industrials (DJINDICES: ^DJI  ) finished the week up more than 170 points, or about 1%, culminating in the average's 11th all-time record closing high of the year on Friday. Investors have been content to ignore any warning signs about a possible correction, instead relying on steady progress in the economy's recovery to buoy the Dow higher. Yet a few stocks didn't manage to follow the Dow upward, with Travelers (NYSE: TRV  ) , Visa (NYSE: V  ) , and IBM (NYSE: IBM  ) being the primary culprits among the 30 stocks in the average this past week.

Travelers fell almost 1%, with most of the losses coming in Friday's session despite the stock's having touched an all-time record high earlier in the day's session. The property and casualty insurance specialist has seen impressive performance for more than a year now, as a particularly favorable period with few extraordinary casualty loss claims has pushed earnings sharply higher. So far in the just-started hurricane season, we still haven't seen any major storms emerge, but investors appear to be preparing for what they see as an inevitable resurgence of catastrophic losses at some point in the future. On the other hand, with the Federal Reserve having reaffirmed its commitment to keep rates low for the foreseeable future, Travelers' bond portfolio could hold up better than some had feared.

Visa nearly matched the same 1% drop on the week, with events in Russia dominating the credit card giant's news. Fears of economic sanctions from Western nations against Russia because of the recent conflict in Ukraine led to the possibility of retaliatory action against Visa and its major rival in the Russian electronic-payments market, but Russia recently delayed new requirements for large capital investments that amount to security deposits for the right to do business in the nation. For its part, Visa would prefer not to deal with the need for making the deposit, yet Russia itself is looking at getting Asian competitors to vie for its electronic-payments business. Russia isn't a critical part of Visa's profit picture, but Visa needs to demonstrate its ability to grow internationally if it wants to support its current valuation.

Source: IBM.

IBM declined roughly half a percent. News from rival Oracle that growth in its enterprise business wasn't as strong as many had hoped during its most recent quarter likely weighed on IBM as well, as both companies have made initiatives like cloud computing and data analytics important parts of their overall business strategies. Yet IBM has suffered longer-term sluggishness as well, with investors remaining uncertain about the broader vision of reducing revenue in favor of a higher-margin mix of business. Until IBM can prove the profitability of the latter approach, some shareholders will likely remain on the sidelines.

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  • Report this Comment On June 21, 2014, at 5:48 PM, ChuckXX wrote:

    The estimates for 15 and 16 have been coming down. I don't think its Russia as much as the earnings estimates.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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9/1/2015 4:35 PM
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