Why You Should Be Bullish on the Dow

Editor's note: This is Part 1 of Jim Cramer's review of the prospects for the stocks that make up the Dow 30. Be sure to read Part 2 and Part 3 and Part 4.

I guess I am bullish.

That's what happens if you review the Dow Jones Industrial Average, the Dow 30, from the bottom up. That's what happens if you calculate each stock's earnings and then solve the equation, multiple times earnings equals share price, for those who haven't read Jim Cramer's Real Money: Sane Investing in an Insane World.

12,470.

That's what my Dow stock-target prices add up to. Now, I know that may not happen all at once. I also know that the General Motors(GM) wild card, plus the gremlins who take care of the Dow, always play havoc with my predictions, which I make each year.

Still, that's a nice gain from where we are now. I believe it is doable, especially when you consider that the U.S. stock market really needs to play catch-up to the rest of the world, which really ran rings around us in 2005.

When I calculated the increase, at first I blanched. "No, I am not that bullish," I said to myself. But I can't fudge. I calculated each stock's gain, and added them all up, and I get 12,470.

So be it.

This is how I got there:

3M Look for $90 at year-end

3M(MMM): Here's a stock that already has had a run simply because it picked a CEO, which is more than it had before. I was beside myself with glee when James McNerney left 3M because he went to Boeing(BA), which I own for Action Alerts PLUS. The new fellow, George Buckley, frankly, is a bit of a question mark. Buckley did a great job at Brunswick(BC), which historically had been very poorly run. The problem is that McNerney left at all, and I don't know why he did. 3M's a great but intransigent company, hard to get your arms around and hard to learn, so I believe that Buckley's got a real transition year ahead of him. That said, raw costs have peaked, so I am not worried about the numbers, just the innovation and add-on growth. I believe the company could make as much as $5 next year, but don't know if it deserves a 20 multiple on that. Let's put it at $90 at year-end 2006.