19 Stocks for Dow Peak

Jon Markman

Editor's Note: Jon D. Markman writes a weekly column for CNBC on MSN Money that is republished here on TheStreet.com.

Not too long from now, with any luck, the most well-known measure of the U.S. stock market -- the Dow Jones Industrial Average -- is going to make an all-time high. It's only about 80 points away from that level now, a less than 1% move, and could get there with a lot more ease than bears and skeptics believe possible.

The event will be much celebrated, to be sure. But does a new high mean anything -- or is it just a number?

The answer may surprise you. The short response is that, yes, a new high is very significant and a huge positive. The long answer is that it's important for reasons that are a little bit fuzzy and strange, and it helps explain a lot about the behavior of the stock market in general.

Allure of a New High

From a practical standpoint, analysts of stock-price behavior like to say that all new highs are bullish (until the last one). This makes a lot of sense. When the stock market makes a new high, people who have money in cash or bonds do a double-take. It gets their attention. They come to think of themselves as idiots for earning 4% on their money in passbook savings accounts when they could be earning 10%-plus by taking a little more risk. After a moment of shock, they get off the dime and begin sliding cash into the stock market.

Investors in large companies do not have a lot of experience with a market going to a new high, because it hasn't happened in a while. Six and a half years, to be exact. So here's the point you really need to understand: New highs are a positive because price is the great persuader.

You see, arguments by analysts that the market should trade higher because of blah-blah-blah are one thing. They are intellectual arguments of something that might happen in the future. But when a new high actually occurs, an emotional tripwire is triggered in investors' minds: The twin electric prods of regret (at missing the prior move) and greed (for future gains) coalesce into a fireball of impulse to get on the gravy train as fast as possible.

Another reason that new highs are bullish is more subtle. When indices or stocks move into record territory, suddenly there are no bitter, longtime shareholders who have been waiting years to unload a losing position. At new highs, everyone is a winner, almost by definition.

With no overhang of losing positions to push through, stocks and indices start to look light as a feather. As more and more buyers are attracted to a dwindling supply of shares held fast by owners, the heightened demand blows prices higher and higher. It is not at all uncommon to see markets that tiptoe ever so gingerly to a new high suddenly sprint to unimagined levels once that threshold has been passed.

Here's an example: From around 1970 to 1982, the stock market traded in a range from around Dow 600 to Dow 1,000. It looked like it was going to break out several times -- in 1972, 1976 and 1981. But each time, the market collapsed like Lucy pulling the football away from Charlie Brown. When the move definitively higher finally transpired in the summer of 1982, amid much moaning and groaning that it was one more fake-out, stocks went into launch mode. From January to mid-May 1983 alone, the Dow went up 20% -- hitting brand-new highs virtually every week.

Time to Buy

The Dow Jones Industrials are only up a little more than 8% so far this year, but it seems like so much more because we've become accustomed to no return at all after a lackluster 2004 and 2005. Just imagine the frenzy that will emerge among your friends and co-workers if stocks move to a new high, and then keep on going until they're up 20% by mid- to late summer. You just know that all those people who were bragging about flipping houses and condos are going to be even more insufferable -- and incite a lot more speculation -- when they start bragging about their stocks.

So what's the best way to take advantage of a march past new highs, if it does occur?

Well, genius, you've got to start buying stocks. Pronto. And the more you think it's probably not the right idea -- that it's too late in the day, that all the best names are up too high, that the economy is about to run off the rails, that Iran is going to blow up the world and the dollar is going to collapse -- the more likely that it is still the right time. (The wrong time, by the way, is when you are absolutely certain that you've got it made).

Basic Lessons

If it's been a while since you actually picked stocks, let me remind you of a few basics first.

Successful investing is about becoming a capable, responsible actor in a story that stars you. It is not really about the economy, politics, the weather or corporate results. And it's not about choosing the right brokerage, analyst, advisor or any other intermediary. It is about your own powers of observation and how you use your brains, intuition, memory and emotions to react and adapt to change.

The change that you are witnessing now, to come full circle, is a new high. Although it is a long way up from the bottom, it may also be a long way down from the ultimate next top. The new high -- if we get there, and if it holds -- marks a milestone of confidence in the strength and credibility of large U.S. companies after six long years in the wilderness following accounting scandals, recession and the 9/11 terror attacks.

To get started again with your cash, you need to get back to basics -- like a major-league infielder taking ground balls during spring training -- and make sure you are using your personal strengths to their best advantage.

Let's cut right to the fastest possible way to get some stocks back in your portfolio.

For a start, you can use a stock screener. In this case, I used MSN's StockScouter stock-rating system. I requested a list of the stocks in the major Dow Jones indices with StockScouter scores greater than 8, and here's the list I came up with on Monday.

Top Dow Jones Index stocks
Dow Industrials	StockScouter Score	5/8 close	Mkt cap
Caterpillar (CAT)	10	$79.79	$53 billion
Citigroup (C)	9	50.19	250 billion
Alcoa (AA)	8	36.05	30.5 billion
Boeing (BA)	8	87.38	70 billion
General Electric (GE)	8	35.01	365 billion
Johnson & Johnson (JNJ)	8	58.71	174 billion
JPMorgan Chase (JPM)	8	46.14	162 billion
3M (MMM)	8	87.99	65 billion
Altria Group (MO)	8	73.54	154 billion
United Technologies (UTX)	8	64.97	65 billion
ExxonMobil (XOM)	8	63.84	387 billion
Dow Transports
GATX (GMT)	9	47.93	2.4 billion
J.B. Hunt Transport Services (JBHT)	9	25.62	3.9 billion
CSX (CSX)	8	73.22	16.4 billion
Landstar System (LSTR)	8	45.01	2.6 billion
Norfolk Southern (NSC)	8	56.01	23.3 billion
Overseas Shipholding Group (OSG)	8	51.50	2.0 billion
Dow Utilities
TXU (TXU)	9	57.23	26 billion
Edison International (EIX)	8	40.09	13.2 billion
Source: MSN

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