Three Blue-Chips With Legs

 | Mar 15, 2013 | 12:00 PM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:






While the Dow Jones Industrial Average is in record territory, investors must wonder if the top is here and if the immediate future is downhill, or if this is just an intermediate peak with a summit that has yet to be climbed.

I do not know what the future holds for the Dow, but some of the stocks that make up the index appear headed for even higher ground. I base this prediction on the fact that several Dow stocks get high grades from my guru strategies. These are computerized strategies I created to mirror the way some of Wall Street's greatest investors analyze stocks.

One member of the Dow that is earning a high grade is Pfizer (PFE), the world's largest pharmaceutical company, founded in 1849 in Brooklyn, N.Y. According to the strategy I base on the writings of James P. O'Shaughnessy, Pfizer is very healthy and is likely to remain so. The strategy looks at market cap (Pfizer's is $201 billion), cash flow which must be positive (Pfizer's is), shares outstanding (of which Pfizer has more than enough) and sales (Pfizer's are a hefty $59 billion). The final step in the analysis is to find the top 50 companies that pass the previous hurdles and have the highest dividend yield. Pfizer's 3.43% yield places it among these top 50 companies.

Another favorite of my O'Shaughnessy-based strategy is E. I. du Pont de Nemours (DD), which is even older than Pfizer, having been founded in Delaware in 1802. DuPont is a giant chemical company that operates in over 80 countries, and it introduced to the world such innovative products as nylon and Tyvek. DuPont easily gets over the strategy's first four hurdles of market cap, positive cash flow per share, shares outstanding and sales. It makes it into the final 50 by having a dividend yield of 3.47%.

UnitedHealth Group (UNH) is a major health benefits and health services company. The strategy I modeled on Peter Lynch's investment approach gives high marks to UnitedHealth. A key component to this strategy is a company's price-to-earnings relative to growth, or P/E/G, which the strategy caps at 1.0 -- UnitedHealth is at 0.58. Its low P/E/G suggests that the stock is well priced. Also in the company's favor is a rock-solid equity-to-assets ratio of 39%, well above the strategy's 5% minimum.

The Dow is an index that moves as its 30 component parts move overall. But these three companies are not just part of the Dow, they are agile and strong individual performers. Any of them would be a strong asset in one's investment portfolio.

Columnist Conversations

volatility is quite low here, and we could see some downsides here in the short term. ...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.