Top Picks 2016: Travelers Companies

01/15/2016 7:00 am EST


John Reese

Founder and CEO, And Validea Capital Management

Our Top Pick for conservative investors for 2016 provides property casualty insurance for autos, homes, and businesses. It has approximately 30,000 employees and operations in the United States and selected international markets, explains John Reese, editor of Validea.

Over the past year, New York City-based Travelers Companies (TRV) has generated revenues of $27 billion.

With a $35 billion market cap, the stock gets excellent scores from a number of my Guru Strategies, which are based on the approaches of history's best investors.

The strategy I base on the writings of mutual fund legend Peter Lynch is particularly high on the stock. Lynch pioneered the use of the PE-to-growth ratio as a valuation metric.

Travelers has a P/E ratio of 10.3 and it has grown earnings per share at a 40.8% pace over the long-term (based on the average of the 3-, 4-, and 5-year EPS growth rates). That makes for a stellar 0.25 PEG ratio.

Travelers also gets strong interest from my James O’Shaughnessy-based growth model. This strategy looks not only for growth, but also for a key combination: strong momentum and good value.

Travelers has a solid 12-month relative strength of 73 and trades for just 1.3 times sales, so it makes the grade.

There’s more to like about Travelers, including its 54% long-term sales growth rate (using an average of the 3-, 4-, and 5-year sales growth rates), 2.1% dividend yield, and 24% equity/assets ratio.

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